TRADE POLICY FRAMEWORKS FOR DEVELOPING ......ii TRADE POLICY FRAMEWORKS FOR DEVELOPING COUNTRIES: A MANUAL OF BEST PRACTICES ACKNOWLEDGEMENTS This manual was prepared by the Trade

TRADE POLICY FRAMEWORKS

FOR DEVELOPING COUNTRIES:

A Manua l o f Best Pract ices

U N I T E D N AT I O N S C O N F E R E N C E O N T R A D E A N D D E V E L O P M E N T

U N I T E D N AT I O N S C O N F E R E N C E O N T R A D E A N D D E V E L O P M E N T

TRADE POLICY FRAMEWORKS

FOR DEVELOPING COUNTRIES:

A Manua l o f Best Pract ices

Geneva 2018

Printed at United Nations, Geneva – 1833407 (E) – November 2018 – 535 – UNCTAD/DITC/TNCD/2017/5

© 2018, United Nations

This work is available open access by complying with the Creative Commons licence created for intergovernmental

organizations, available at http://creativecommons.org/licenses/by/3.0/igo/.

The findings, interpretations and conclusions expressed herein are those of the authors and do not necessarily

reflect the views of the United Nations or its officials or Member States.

The designation employed and the presentation of material on any map in this work do not imply the expression

of any opinion whatsoever on the part of the United Nations concerning the legal status of any country, territory,

city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.

Photocopies and reproductions of excerpts are allowed with proper credits.

This publication has not been formally edited.

United Nations publication issued by the United Nations Conference on Trade and Development.

UNCTAD/DITC/TNCD/2017/5

TRADE POLICY FRAMEWORKS FOR DEVELOPING COUNTRIES: A MANUAL OF BEST PRACTICESii

ACKNOWLEDGEMENTS

This manual was prepared by the Trade Negotiations and Commercial Diplomacy Branch (TNCDB), Division

on International Trade and Commodities (DITC), UNCTAD, with contributions from Craig VanGrasstek, Adjunct

Lecturer in Public Policy at the John F. Kennedy School of Government, Harvard University. The work was

coordinated by Taisuke Ito, TNCDB/DITC, UNCTAD.

The cover design and desktop publishing was done by Laura Moresino-Borini.

ACKNOWLEDGEMENTS iii

NOTE

References to dollars are United States of America dollars, unless otherwise stated.

For further information on the publication, please contact:

Trade Negotiations and Commercial Diplomacy Branch

Division on International Trade in Goods and Services, and Commodities

Tel: +41 22 917 56 40

Fax: +41 22 917 00 44

www.unctad.org/tradenegotiations

[email protected]

TRADE POLICY FRAMEWORKS FOR DEVELOPING COUNTRIES: A MANUAL OF BEST PRACTICESiv

ABBREVIATIONS AND ACRONYMS

ACWL Advisory Centre on WTO Law

CVD countervailing duty

CROSQ CARICOM Regional Organization for Standards and Quality

DITC Division on International Trade and Commodities

DTIS diagnostic trade integration studies

ITA information technology agreement

LDC least developed country

MFN most favoured nation

RTA regional trade arrangement

GATT General Agreement on Tariffs and Trade

GATS General Agreement on Trade in Services

OECD Organization for Economic Cooperation and Development

PNLog National Logistics Plan

SADC Southern African Development Community

SPS sanitary and phytosanitary

TNCD Trade Negotiations and Commercial Diplomacy Branch

TPF trade policy framework

TPR trade policy review

UNCTAD United Nations Conference on Trade and Development

UNIDO United Nations Industrial Development Organization

USTR United States Trade Representative

WITS World Integrated Trade Solution

WTO World Trade Organization

ABBREVIATIONS AND ACRONYMS v

CONTENTS

Acknowlegements ............................................................................................................................................ iii

Note ................................................................................................................................................................. iv

Abbreviations and acronyms ..............................................................................................................................v

Executive summary .......................................................................................................................................... ix

I. Introduction and overview ......................................................................................................................... 1

A. The trade policymaking challenge ............................................................................................................ 5

B. Value of trade policy frameworks .............................................................................................................. 6

C. Structure of this manual ........................................................................................................................... 6

D. A few caveats .......................................................................................................................................... 7

II. Trade and development ............................................................................................................................ 9

A. Magnitude and scope of trade .............................................................................................................. 10

B. Geography and economic composition ................................................................................................. 11

1. Composition of the economy .............................................................................................................. 11

2. Access to the sea ............................................................................................................................... 15

3. Other permanent or long-term characteristics .................................................................................... 16

C. Relationship between income, exports and open markets ..................................................................... 17

1. Higher exports are associated with higher income............................................................................... 17

2. Defining a country’s strategic orientation ............................................................................................. 18

3. When should an economy open? ....................................................................................................... 20

III. Instruments of trade policy ................................................................................................................... 23

A. Measures affecting the movement of goods .......................................................................................... 25

1. Tariffs .................................................................................................................................................. 25

2. Procedures and rules affecting the movement of goods ...................................................................... 27

3. Subsidies and other incentives............................................................................................................ 29

4. Antidumping and other trade-remedy laws.......................................................................................... 30

B. Measures affecting investment and trade in services ............................................................................. 32

1. Financial services ................................................................................................................................ 34

2. Transportation and tourism.................................................................................................................. 34

3. Movement of persons ......................................................................................................................... 34

IV. Trade negotiations and trade promotion .............................................................................................. 37

A. Market access: Preferential or reciprocal? .............................................................................................. 38

B. Multilateral, regional and bilateral agreements ........................................................................................ 40

1. Multilateralism and regionalism ............................................................................................................ 40

2. Participation in WTO ........................................................................................................................... 41

3. Regional trade arrangements .............................................................................................................. 43

C. Implementation and enforcement of trade agreements .......................................................................... 44

1. Soft enforcement: Transparency, notifications and trade policy reviews ............................................... 45

2. Hard enforcement: Dispute settlement ............................................................................................... 46

D. Trade and investment promotion ............................................................................................................ 48

IV. Trade policymaking institutions ............................................................................................................ 51

A. Jurisdiction and resources of a lead ministry .......................................................................................... 52

1. Which ministry should lead on trade?.................................................................................................. 52

2. Staffing and capacity ........................................................................................................................... 53

B. Need for internal coordination and consultation ...................................................................................... 54

1. Interministerial consultations................................................................................................................ 56

2. Consultations between different levels and branches of government ................................................... 58

3. Consultations with the private sector................................................................................................... 59

CONTENTS vii

Tables

Table 1. Sustainable Development Goals: Selected trade-related goals and targets .......................................... 4

Table 2. Relationship between the agricultural sector and income, 2015 .........................................................13

Table 3. Relationship between the services sector and income, 2015 ...................................................................... 13

Table 4. Relationship between access to the sea and income .................................................................................... 15

Table 5. Relationship between exports and income, 2015 .......................................................................................... 18

Table 6. Relationship between imports and income, 2015............................................................................................ 18

Table 7. Characteristics of four Asian economies ............................................................................................ 21

Table 8. Relationship between economic freedom and income .................................................................................. 22

Table 9. Instruments that countries may use to influence trade ...................................................................... 24

Table 10. Relationship between non-agricultural tariffs and income, 2014 ............................................................... 25

Table 11. Relationship between agricultural tariffs and income, 2014 ........................................................................ 26

Table 12. Average time and costs involved in trading across borders ............................................................. 28

Table 13. Antidumping orders imposed on developing countries, 1995–2014 ................................................. 31

Table 14. Antidumping activity by developing countries, 1995–2014 ............................................................... 31

Table 15. Countervailing duty orders imposed on developing countries, 1995–2014 ....................................... 32

Table 16. Countervailing duty activity initiated by developing countries, 1995–2014 ........................................ 32

Table 17. Principal themes in developing–developed country trade relationships ............................................. 39

Table 18. Exemplars of varying approaches to multilateralism and regionalism and level of activity in WTO ..... 40

Table 19. Relationship between extraregional trade agreements and Income ......................................................... 43

Table 20. Number of WTO disputes involving developing countries, 1995–2016 ............................................. 47

Table 21. Illustrative list of government ministries with interests in trade and trade-related issues .................... 57

Table 22. Trade policy framework assessment criteria ..................................................................................... 63

Table 23. Characteristics of three idealized trade strategies of developing countries ....................................... 65

Table 24. Three assessment mechanisms ....................................................................................................... 68

Checklists

Checklist 1. The basics ................................................................................................................................... 75

Checklist 2. Evolution of a country’s trade and development policy ................................................................. 75

Checklist 3. A country’s trade policy instruments ............................................................................................ 76

Checklist 4. Organization and consultations among policymaking institutions ................................................. 77

Checklist 5. Capacity of trade policymaking institutions .................................................................................. 77

Checklist 6. A country’s representation abroad ............................................................................................... 78

Checklist 7. Institutions to interview ............................................................................................................... 78

VI. Best practices for the conduct of a trade policy framework ............................................................. 61

A. Vision and ownership ............................................................................................................................. 62

B. Clarity and legal compliance................................................................................................................... 66

C. Timing and relationship to other instruments .......................................................................................... 67

D. Internal and external constraints ............................................................................................................ 68

E. Data collection and analysis ................................................................................................................... 70

VII. Conclusions and checklists ................................................................................................................. 73

Endnotes ........................................................................................................................................................ 79

TRADE POLICY FRAMEWORKS FOR DEVELOPING COUNTRIES: A MANUAL OF BEST PRACTICESviii

Boxes

Box 1. Inspirations for trade policy frameworks ................................................................................................. 2

Box 1. Inspirations for trade policy frameworks (continued) .............................................................................................. 3

Box 2. Recommendations for trade policy frameworks from Angola to Zambia ................................................. 3

Box 3. Three classical positions on trade and development ............................................................................ 19

Box 4. Who is in WTO? And who is not? ........................................................................................................ 41

Box 5. Sources of information on compliance and non-tariff barriers ............................................................... 45

Box 6. Capacity-building programmes for trade officials ................................................................................. 55

Box 7. Consultative mechanisms in developing countries: Examples from TPFs ............................................. 56

Box 8. Stages in the development of a trade policy framework ....................................................................... 62

Box 9. Strategic vision presented in the trade policy framework for Namibia ................................................... 67

Box 10. Sources of trade and tariff data ......................................................................................................... 71

CONTENTS ix

EXECUTIVE SUMMARY

Trade policymaking is a challenging task in all countries, and presents especially great difficulties for developing

countries. What may seem at first to be a purely external exercise is intimately related to development policy as

a whole and involves a series of domestic trade-offs.

A trade policy framework (TPF) offers a structure for the many decisions that a country’s negotiators, legislators

and litigators must make as they devise and implement policy, in close consultations with critical stakeholders in

academia and civil society, as well as the private sector. The aims of a TPF are to reveal the principal challenges

that a country faces in trade policy, prioritize its objectives and lay out a plan to achieve those goals through

an enlightened trade policy. The United Nations Conference on Trade and Development (UNCTAD) provides

technical assistance to countries in developing their TPFs.

The purpose of this manual is to provide guidance in the development of a TPF. It is based largely on the lessons

learned from the TPFs undertaken, as well as comparative data on the challenges and experiences of developing

countries as a group.

EXECUTIVE SUMMARY xi

INTRODUCTION AND OVERVIEW

I

Trade policymaking is a challenging task in all

countries and presents especially great difficulties

for officials in developing countries. What may seem

at first to be a purely external exercise is intimately

related to development policy as a whole and

involves a series of domestic trade-offs. To make

policy in this field, the interests of consumers and

producers must be balanced while the goals of the

most efficient and export-oriented industries must

be weighed against those that are still struggling to

achieve competitiveness. When deciding what kinds

of activities they will tax or incentivize, or what trade

agreements they are prepared to negotiate, and what

sort of tariff concessions they are willing to make,

policymakers have always had to reconcile the fiscal

needs of the treasury with the potential for job creation.

Matters have become more complicated with the

ever-widening range of issues that are brought to

the negotiating table and by the proliferation of those

tables. The many demands that are made upon

trade policymakers in this new environment dwarf

the problems that their predecessors once faced,

being technically more complex and politically more

intractable.

Just as no smart traveller would go on a journey

without a road map, policymakers in this field are

well advised to have a reasoned plan that guides

their actions. A trade policy framework (TPF) offers

a structure for the many decisions that a country’s

negotiators, legislators, and litigators must make as

they devise and implement policy. The aims of a TPF

are to reveal the principal challenges that a country

faces in its trade policy, prioritize its objectives, and lay

out a plan to achieve those goals. A country’s decision

to seek assistance in the development of a TPF is

most commonly triggered by the realization that it has

been underperforming its expectations in the external

sector and that assistance is needed to identify the

bottlenecks and propose ways to break through

them. The United Nations Conference on Trade and

Development (UNCTAD) provides technical assistance

to countries in the development of their TPFs.

A dozen such projects have been completed as

summarized in box 1, and they are also referenced

throughout this manual. In most cases, TPFs were

requested upon a Government’s recognition that

its existing trade and development policy was not

producing the intended results. Among the most typical

problems that countries encounter is a negative or

deteriorating trade balance, a manufacturing sector in

which employment or capacity utilization is shrinking, or

the maldistribution of wealth. Whatever the underlying

cause, countries may hope that a more dynamic trade

policy can result in deeper and broader development.

TPFs are tailor-made to meet the needs and challenges

of the specific countries under examination, with the

conclusions and recommendations varying according

to the needs and circumstances of the countries in

question (see box 2).

Box 1. Inspirations for trade policy frameworks

TPFs produced thus far have each responded to perceptions of shortcomings in the existing trade strategies of the

countries under examination. Starting from the recognition that a problem exists, they each turned to a detailed diagnosis

and then — as discussed in box 2 — the development of policy prescriptions.

Much of the TPF process grew out of the experience with Papua New Guinea . During the process of accession to WTO,

which concluded in 1996, policymakers in that country concluded that they lacked a coherent framework for the conduct

of trade policy. The technical cooperation that they received from UNCTAD in the years following that experience evolved

into the Papua New Guinea Trade Policy Framework, issued in 2006.

This precedent was built upon with several other developing countries. The Ministry of Trade and Industry of Rwanda

requested assistance from UNCTAD in 2008, following its acknowledgment of the country’s immense structural weaknesses.

The Jamaica Trade Policy Framework (2015) came about after the Government determined that trade had underperformed

for 20 years. This poor showing was characterized by limited export growth, increased imports, reduced competitiveness

and continued dependence on a few goods.

Several TPFs were largely inspired by concerns over a country’s dependence on a single commodity and the need for

diversification. The TPF for Algeria points to dependence on hydrocarbons as a root cause for both low growth and the

steady decline of manufacturing from 15 per cent of GDP in the mid-1980s to just 5 per cent. The TPF for Zambia began

with the recognition that the country is overly dependent on copper exports. The drawbacks of that dependence were

less evident when copper prices were high, but even then the windfall was not shared throughout the economy. Similarly,

the TPF for Angola was inspired by concerns over dependence on oil and global price volatility, coupled with the special

problems of a conflict State.

TRADE POLICY FRAMEWORKS FOR DEVELOPING COUNTRIES: A MANUAL OF BEST PRACTICES2

Box 1. Inspirations for trade policy frameworks (continued)

Botswana is likewise dependent upon one major export — diamonds — and its policymakers also felt the need for better

implementation of its national trade policy. The TPF for Namibia began from the premise that while some diversification

has taken place in recent years, the country remains reliant on primary exports to developed countries and to South Africa.

In some countries, the concern is not with overall growth but the differing impact for specific sectors or communities. TPFs

for both the Dominican Republic and Panama observe that while trade has helped to raise national income, the gains have

been uneven. Social indicators in the Dominican Republic have not kept pace with income, while in Panama there are

concerns over the concentration of wealth in a limited number of services and other activities.

Two TPFs were more narrowly focused on specific sectors. Mexico’s Agricultural Development: Perspectives and Outlook

(2014) responded to concerns over continued economic marginalization of small holders, and of agriculture generally.

Tunisia’s Trade Policy Framework (2015) was focused on ascertaining implications of Participation in the WTO’s Information

Technology Agreement.

Box 2. Recommendations for trade policy frameworks from Angola to Zambia

Just as there are differences in the inspirations for countries’ TPFs, so too do the resulting reports differ in their proposed

solutions.

Algeria: The country prioritizes accession to WTO and further dismantling of trade barriers within the framework of the

Association Agreement with the European Union.

Angola: The Government should create an enabling environment by ensuring macroeconomic stability, strengthening the

institutional and regulatory framework, intensifying human resources development, enhancing technology and investing in

infrastructure.

Botswana: A series of changes to the National Trade Policy to provide more specific guidance on the policy stance, as well

as a detailed implementation matrix, including to strengthen national regulatory and institutional frameworks and address

the private sector’s competitive environment.

Dominican Republic: A strategy for trade policy and the creation of a more dynamic export sector based on a

competitive insertion in global markets and fuller participation in global and regional value chains through enhanced

domestic competitiveness, inward investment promotion and outward-oriented services trade strategies, with a detailed

implementation matrix.

Jamaica: A trade policy calling for better leveraging of revealed comparative advantage in the priority export sectors,

addressing infrastructure bottlenecks, improved standards compliance, better linkages between goods and services,

moving up in the value addition in agriculture and rationalization of trade and investment incentives.

Mexico: A coordinated approach to agricultural policy, both in terms of institutions and direction, and a series of more

specific recommendations on specific products and markets to that end; ensuring coherence development and poverty

reduction agenda in Mexico with trade negotiations in regional trade negotiations.

Namibia: A facilitative policy mix that encourages investors to include Namibian companies in their value chains.

Panama: A market-driven, development-led, sustainable trade policy that is capable of catalysing economic growth,

reducing poverty and improving living standards through diversification and structural transformation leveraging on

agroprocessing, fishery and logistics services.

Papua New Guinea: The fuller participation of stakeholders and civil society in policymaking, the upgrading of the

Department of Trade and Industry, and other institutional reforms.

Rwanda: Related the country’s trade policy to the existing National Development and Poverty Reduction Strategy. It called

for “a development-driven trade policy approach, as opposed to an export-led, trade led or demand-led strategy”.

Tunisia: Participation in the Information Technology Agreement should be complemented with policies in the

macroeconomic, fiscal, trade, and industrial fields, as well as measures aimed at strengthening the country’s regulatory

and institutional framework.

Zambia: A strategic trade policy to support industrial sectors and recommendation of a stable macroeconomic

environment, agreements that support diversification and value addition, reformed services regulations to strengthen

national competitiveness, regional integration to leverage more on regional trade and encouragement of foreign investment.

I. INTRODUCTION AND OVERVIEW 3

Table 1. Sustainable Development Goals: Selected trade-related goals and targets

ZEROHUNGER

Goal 2. End hunger, achieve food security 2.b Correct and prevent trade restrictions and distortions in world agricultural markets, including through the parallel

elimination of all forms of agricultural export subsidies and all export measures with equivalent effect

GOOD HEALTHAND WELL-BEING

Goal 3. Ensure healthy lives 3.b Provide access to affordable essential medicines and vaccines, in accordance with the Doha Declaration on the

TRIPS Agreement and Public Health

AFFORDABLE AND CLEAN ENERGY Goal 7. Ensure access to affordable reliable, sustainable and modern energy for all

7.1 By 2030, ensure universal access to affordable, reliable and modern energy services

DECENT WORK AND ECONOMIC GROWTH

Goal 8. Promote sustained, inclusive and sustainable economic growth 8.2 Achieve higher levels of economic productivity through diversification, technological upgrading and innovation

8.a Increase Aid for Trade support for developing countries … including through the Enhanced Integrated Framework

for Trade-Related Technical Assistance to Least Developed Countries

INDUSTRY, INNOVATIONAND INFRASTRUCTURE

Goal 9. Build resilient infrastructure 9.1 Develop quality, reliable, sustainable and resilient infrastructure, including regional and transborder infrastructure

9.3 Increase the access of small-scale industrial and other enterprises to financial services

REDUCEDINEQUALITIES

Goal 10. Reduce inequality within and among countries 10.a Implement the principle of special and differential treatment for developing countries

10.c By 2030, reduce to less than 3 per cent the transaction costs of migrant remittances

LIFE BELOW WATER Goal 14. Conserve and sustainably use the oceans

14.6 By 2020, prohibit certain forms of fisheries subsidies

PARTNERSHIPSFOR THE GOALS

Goal 17. Strengthen the means of implementation and revitalize the Global Partnership for Sustainable Development17.10 Promote a universal, rules-based, open, non-discriminatory and equitable multilateral trading system under

the World Trade Organization, including through the conclusion of negotiations under its Doha Development Agenda

17.11 Significantly increase the exports of developing countries, in particular with a view to doubling the least

developed countries’ share of global exports by 2020

17.12 Realize timely implementation of duty-free and quota-free market access on a lasting basis for all least developed

countries, consistent with World Trade Organization decisions, including by ensuring that preferential rules of origin

applicable to imports from least developed countries are transparent and simple, and contribute to facilitating market access

NO POVERTY Goal 1. End poverty in all its forms everywhere

1.1 By 2030, eradicate extreme poverty for all people everywhere

The purpose of this manual is to provide guidance in

the development of a TPF. It is based largely on the

lessons learned from the TPFs, as well as comparative

data on the challenges and experiences of developing

countries as a group. The manual seeks to situate

trade policy as a branch of development policy,

relating this topic to the Sustainable Development

Goals. The Goals explicitly and implicitly recognize the

contribution of trade in many regards, and Goal 17 on

the means of implementation, in particular, makes this

recognition explicit (see table 1).


Several of the Sustainable Development Goals

speak directly to issues raised in this manual and are

cited where appropriate. The underlying philosophy

of this project is that trade policy does not exist

solely to achieve some abstract concept such as a

positive trade balance, but should instead be aimed

at promoting the development of countries and

advancing the wellbeing of their people. A proper TPF

will treat trade and development not as competing but

as complementary ends. It will identify the hurdles that

the country must clear in each area, and offer a vision

for the reduction or elimination of these barriers.

This analysis takes as its point of departure the

recognition that the economic development of

countries, especially as reflected in human welfare,

matters more than trade per se. “[T]rade should be the

servant of development policy [and] not its master,”

according to Stewart and Ghani, such that “the

general strategy of development should be chosen

first — including the desired technology choice,

income distribution, mode of production, etc. — and

a trading strategy chosen which fits in with this, rather

than the trading environment dictating the choice

of development strategy.”1 It is in this spirit that the

analysis that follows is not solely confined to narrow

questions of how a country ought to set its tariff,

structure its trade agreements and otherwise manage

the minutiae of a trade regime, but also places these

questions in a larger developmental context.

A. THE TRADE POLICYMAKING CHALLENGE

There are several respects in which trade policymaking

today is a more important and difficult field of public

policy than it once had been. First, trade as traditionally

defined now comprises a larger part of most countries’

economies. The process of globalization has linked

rising shares of output, consumption, and employment

to imports, exports, and foreign direct investment, a

fact that holds true for countries at all levels of income

and development. Trade negotiations have grown in

number and scope over the past few decades; they

now cover a much wider range of issues than before

and take place simultaneously at the multilateral and

the regional levels.

Matters are made even more complex by the fact

that developing countries are now expected to bear a

greater share of the burden in the international trading

system. Gone are the days when most developing

countries were not contracting parties to the General

Agreement on Tariffs and Trade (GATT), many of those

that were in the Agreement opted not to engage

seriously in negotiations or to adopt most GATT

agreements, and trade relations with industrialized

countries were typically based on one-way preferences

granted by developed countries. Developing countries

have subsequently become more active and significant

players in the multilateral system, with nearly all of

them joining the Agreement and then the World Trade

Organization (WTO), and most are also engaged in

at least one free trade agreement, customs union,

or other form of regional trade arrangement (RTA).

Some of them still restrict their regional negotiations

to pacts with their immediate neighbours, but others

opt to negotiate RTAs with one or more of the major

industrialized countries. The question most countries

face is no longer whether they will open and integrate

their economies, but at what pace and in what way.

Countries must decide what form of trade agreements

they will choose to negotiate, what terms they will seek

in these agreements, how far they will go towards the

reduction or elimination of tariffs and other restrictions

on trade and investment, and what domestic reforms

they will adopt — either autonomously or in order

to keep the commitments that they make in trade

agreements — as complements to their market-

opening initiatives.

Perhaps the most significant challenge comes in the

very redefinition of what constitutes trade policy, and

the consequent expansion in the array of issues and

interested parties with which a trade ministry must

deal. The borderlines that separate trade from other

fields of public policy have always been somewhat

blurry, and the distinctions have become even fuzzier

over the course of the last generation. What was

once a limited area of policy that intersected with

aspects of foreign and fiscal policy is now more fully

linked to nearly every consequential topic on the

national agenda. Among the subjects now handled

in most trade negotiations are investment, intellectual

property rights and trade in services; some talks go

further still, incorporating such matters as competition

policy, labour rights, and environmental protection.

Each of these issues have profound implications for

countries’ development strategies. Policymakers in

the field of trade policy, whether they are negotiators,

legislators, or litigators, are now called upon to deal

with a range of issues over which officials in other

ministries and agencies have principal jurisdiction.

Conversely, officials in those other bodies must live


with the consequences of trade negotiations and

disputes. It is necessary for policymakers in all fields

to understand the ways that trade is related to other

areas of public policy, and especially how it needs to

be mainstreamed into development policy.

B. VALUE OF TRADE POLICY FRAMEWORKS

A TPF can help countries meet these needs by

providing a sense of the big picture in which trade

policy forms a part, while also filling in many of the

details of that landscape. The document is intended

to examine the specific circumstances of a country’s

trade and development problems, focusing on both its

challenges and opportunities, and to prioritize the steps

to be taken internationally and domestically in order to

remove the impediments to its full participation in the

trading system. Those domestic steps will typically be

just as important, and often more so, as any deals

reached with the country’s trading partners. While

exporters may still face tariff and non-tariff barriers

for some of its exports to important foreign markets,

they will often find that local constraints — whether

infrastructural, institutional, or societal — can be the

most significant obstacles to their competitiveness.

A TPF can identify the most important barriers and

inefficiencies at home and abroad, and put forward

plans to address them.

The primary beneficiary of a TPF is the country under

examination, but these reports may also be seen as

detailed case studies in the relationship between trade

and development. Taken as a whole, the body of TPFs

also provide a useful resource for those developing

countries that are not themselves subject to this

exercise. These analyses present information on how

countries in similar circumstances have dealt with their

challenges. By examining both what has worked and

what has not, TPFs can collectively help to identify best

practices for trade and development. This does mean

devising some universally valid trade strategy. Each

country will have its own special mix of history, factor

endowments, geographic position, political culture

and so forth, and it would misguided to attempt to

devise a catch-all set of policy prescriptions that gloss

over those differences. But while all countries may be

said to be special, none of them are entirely unique.

There are important respects in which any one country

will be similar to many others, and the experiences of

their peers — both positive and negative — can offer

useful guidance.

TPFs often point to success stories in other developing

countries, offering models that a country may seek

to emulate. The TPF for Jamaica was informed by

the lessons learned from the tourism strategy of the

Dominican Republic, for example, and the TPF for

Rwanda pointed to the success of Kenya in flower

exports. Similarly, the TPF for Tunisia drew upon

the experience of other countries in advising on the

consequences of signing the Information Technology

Agreement (ITA); this included some countries that

had joined the Agreement (i.e. Costa Rica, India and

Thailand), and others that did not (i.e. Bangladesh and

Kenya).

Beyond those tactical lessons, TPFs can also address

the perennial, strategic issues of trade and development.

For over two centuries, the key question in this debate

has concerned the proper sequence for countries to

follow in the opening of domestic and foreign markets.

At what stage in its development should a country

move to lower or eliminate its barriers to imports and

begin the transition from a State-led to a market-led

economy? To simplify, should a country (1) seek to

retain a large role for the State for as long as possible,

promoting domestic industry while restraining imports

through, inter alia, high tariff barriers, or (2) should it

open its market and reduce intervention at an early

stage of its economic development, or (3) should it

calibrate its market-opening steps with the pace of its

development, such that it becomes progressively less

interventionist as its economy gains in sophistication,

prosperity, and diversity? There have been proponents

and practitioners of all three positions since the late

eighteenth century, and there is no consensus position

as to which approach has historically best served the

interests of developing countries. The TPFs cannot

resolve that debate once and for all, but they can make

a valuable contribution to it by providing examples of

what has and has not worked in the experiences of

specific developing countries.

C. STRUCTURE OF THIS MANUAL

This manual takes a five-step approach to defining the

subject matter of a TPF and specifying the process by

which it should be prepared.

Part II places the larger issues in context by exploring

the evolution of the debate over trade and development,

presenting data on the rising level of trade in national

economies and the association between exports


and success. It reviews the major strategic options

of developing countries, including the all-important

question of when countries ought to begin opening

their markets. The analysis contrasts the experiences

of successful economies that committed themselves

to liberalization at an early stage of development with

those of other economies that instead pursued a

two-stage trade strategy. Comparative data generally

confirm a close association between income and the

extent to which countries leave major decisions to the

market rather than the state.

Part III takes up tactical issues, focusing on the

instruments of trade policy. A TPF needs to identify

not only the tools that are available to the country’s

policymakers but also those that are employed by

its trading partners. The framework should consider

the types and levels of tariffs that are imposed by

the country and its partners, and how they might

be adjusted — whether autonomously or through

negotiations — to serve the country’s interests in

production and exports. The data show that there is

generally an inverse relationship between tariffs and

income, such that barriers tend to be lower where

incomes are higher, but this is not an absolute rule.

Beyond tariffs, countries also need to address a wide

range of issues that determine the costs of doing

business. These include the many procedures and

rules that affect the movement of goods, antidumping

and other trade-remedy laws, and the whole range of

laws and policies governing services, investment and

the protection of intellectual property rights.

Part IV takes on trade negotiations and trade

promotion. One of the most important decisions

that a country faces in its trade strategy is whether it

aims to establish trade relations that are preferential

or reciprocal. For decades, developing countries

typically sought open access to the markets of their

developed trading partners while seeking to maintain

relatively high tariff and non-tariff barriers to their own

markets. Many countries still take this approach, but

others — where incomes are typically higher — have

been willing to engage in reciprocal negotiations

through which they would achieve greater openness

in both directions. They often do so by simultaneously

engaging in multilateral initiatives and in RTAs. This

part reviews the costs and benefits of these different

negotiating forums, and also examines the challenges

that come in the implementation and enforcement of

trade agreements. This includes both the soft forms

of enforcement (e.g. transparency, notifications and

the like) and the hard option of the WTO’s Dispute

Settlement Body. The value of trade agreements can

also be multiplied through well-designed programmes

of trade and investment promotion.

Part V addresses the institutions of trade policymaking.

The first decision that any country must face in this

field is which ministry or other agency will be given

principal responsibility for this subject, a task that

might reasonably be assigned to the foreign ministry,

the finance ministry, or some other body. The analysis

reviews the arguments for each of these divisions

of labour. It concludes that there are trade-offs with

each of these options and that close coordination is

needed between different agencies of Government

and between the public and private sectors no matter

what institution takes the lead. It is also an area in

which officials often need assistance to build their

capacity and expertise.

Part VI identifies best practices in the preparation of

a TPF. In addition to laying out the principal steps in

the process, from the request for assistance through

the execution of a plan, this part argues that a TPF

should present an overall vision of where trade policy

fits in the country’s development strategy. A framework

needs to be owned by the country itself, and promoted

by a champion in the Government. It should clearly

identify the main objectives of trade policy, whether

they are conceived as inward-oriented, outward-

oriented, or market-oriented. Other issues addressed

in this concluding part concern the timing of a TPF, the

attention devoted to internal and external constraints,

and the collection and analysis of data. Appendices

elaborate on these points by providing checklists of

issues to be addressed with respect to the country’s

characteristics and its strategy, the capacity of the

principal trade agencies, and the institutions in

Government and civil society that ought to be consulted

when devising, revising, and validating a TPF.

Part VII concludes with some final observations and

presents checklists that researchers may employ

when conducting a TPF.

D. A FEW CAVEATS

A point of terminology should be clarified from the

start. Throughout this manual, the term “trade ministry”

is used to mean whatever government agency is

given the principal responsibility for the making of

trade policy, and especially the conduct of trade

negotiations. This does not necessarily mean that the


term “trade” appears in the title of that ministry, nor

indeed that the agency is deemed to be a ministry;

it might alternatively be designated as a department,

bureau, or other entity within a larger ministry, or

be operated as some other type of independent

or interministerial body. The same institution that

takes the lead in trade negotiations may also be

responsible for other trade-related functions, such as

the promotion of exports and investment; alternatively,

some or all of these tasks may be assigned to other

government bodies, to public–private partnerships,

or be outsourced altogether to the private sector. For

the sake of simplicity, however, all of these various

arrangements are subsumed here under the rubric of

“the trade ministry”.

The analysis makes no effort to urge the adoption

of any specific philosophy or doctrine regarding

trade policy and its place in a country’s development

strategy, nor does it identify a single, best approach

that countries might take to the ministerial division

of labour. The underlying assumption throughout is

that no matter what objectives a country may seek

in its trade policy, and no matter what organizational

arrangements or negotiating tactics it may adopt, its

chances of success will be greater if it has in place

procedures for systematically monitoring and analysing

economic and political data, efficiently managing the

flow of internal and external communications, dealing

effectively with all partners and stakeholders, and

devising policy within a well-reasoned framework. All

countries face the questions that are posed here, but

each of them are responsible for finding the answers

that best suit their own circumstances.

It is also important to stress that this is not a strategy

manual, providing countries with guidance on how

best to achieve their objectives in a given negotiation.

There already exists abundant literature on his subject,

filled with the requisite quotations from Sun Tzu and

employing the sometimes arcane jargon of aspiration

points, zones of possible agreement, and BATNAs

(best alternatives to a negotiated agreement). The

contributions to that literature instruct readers on

how best to create and claim value, how to choose

between integrative and distributive strategies, how

to play a two-level game, how to know the difference

between a true threat and a mere bluff, and how a

good negotiator tries not just to persuade one’s

counterpart but even to shape his or her perceptions.

While recognizing the value of this literature, and urging

that readers familiarize themselves with the theory and

practice of negotiations, the present manual does not

itself constitute such a guide. It instead offers pointers

on how countries might go about devising one that is

custom built to their own needs.

Readers will note that at many points in this analysis,

data are provided on how developing countries

compare on certain issues. Those comparisons

generally exclude developing or transitional countries in

either Europe or the Middle East (except North Africa),

and also exclude major oil exporters.2 Those exclusions

are based on the very different circumstances that

both sets of countries find themselves in vis à vis

developing countries as a whole. Including data on

those countries, or on the economies in transition,

could severely skew those comparisons that seek to

identify the relationship (if any) between a given factor

and average income per capita. Note also that World

Bank data are used whenever possible, and most

often for 2015. If 2015 data are not available for a

given country, then the 2014 figures are used; except

where otherwise noted, countries for which 2014 data

are not available are excluded from any table.


Trade and development

II

Policymakers in past generations may have thought

it was possible to treat trade and development as if

these were distinct functions. Trade dealt principally

with the external sector, whereas development was

seen as a largely domestic phenomenon. Decades of

experience have worked from two directions to erase

this distinction. On the trade side, the expanding scope

in the subject matter of negotiations and disputes

has led policymakers to realize just how far this topic

overlaps with other fields of public policy. On the

development side, countries that have placed great

emphasis on promoting exports have generally done

much better than those countries whose strategies

have entailed the substitution of imports with domestic

production. Far from being distinct fields of public

policy, it is now widely acknowledged that these two

areas are integrally related to one another.

One of the chief tasks of a TPF is to promote the

mainstreaming of trade policy into development policy,

and to highlight those ways in which the two fields are

intimately tied. Much more than an extended mission

statement for a trade ministry, a TPF should ideally

identify the areas in which the country may expand

its capacity for production and trade, as well as the

obstacles that it must overcome in order to achieve

that end.

A. MAGNITUDE AND SCOPE OF TRADE

Trade policymaking is more complex and important

now than it was in past generations because trade itself

has changed both quantitatively and qualitatively. The

share of trade in national economies has grown, and

the scope of issues that fall within trade negotiations

has widened considerably.

Even in its most traditional and narrow definition, trade

is more important today than it was a generation ago.

The globe was becoming steadily more trade intensive

during the quarter century that preceded the financial

crisis of 2008–2009, as can be seen from the data in

figure 1. Whereas in 1985, trade accounted for about

15–20 per cent of typical countries’ GDPs, by 2008,

it generally exceeded 30 per cent . This point held true

for countries at all levels of economic development,

even if the shifts from one year to the next were more

volatile for the least developed than they were for the

higher-income countries. The path since the financial

crisis has been unsteady. The trade intensity of national

economies seemed to be recovering immediately after

that crisis, but the last few years have witnessed the

stagnation of trade in the high-income countries and a

decline for the developing countries. It is too soon to

Figure 1. Exports of goods and services as a percentage of GDP, 1985–2015 (Country averages by income level)

Source: World Bank data at http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS.

75

60

45

30

15

0

Least developed MIddle income High income


know whether this post-crisis downturn represents a

temporary setback or the emergence of a new pattern,

but either way, it speaks to the need for countries to

redouble their efforts to engage in mutually beneficial

exchanges of goods and services.

The qualitative changes in the field of trade have been

even more consequential. Trade policymaking may be

defined as the development and execution of national

laws and policies, as well as international agreements

and initiatives, that are variously intended to facilitate,

promote, prohibit, tax or regulate the cross-border

movement of tradeables. That basic definition can

be applied to any country and any period of history,

but the scope of its meaning has changed over time.

The tasks and jurisdiction of a trade ministry in 1980

were little different from what they had been in 1880;

in both periods, the chief focus was on tariffs and

other border measures affecting the movement of

goods. Following a generation of sweeping changes

in the shape and scope of the trading system, and

also in the larger world to which that system belongs,

the responsibilities assigned to trade ministries are

radically different today. That can be seen both in the

range of issues that are defined to fall within the scope

of trade negotiations and in the importance attached

to the removal of domestic constraints. Put another

way, trade ministries used to spend much of their

time trying to identify and overcome the major barriers

that other countries deliberately imposed on imports

of goods, but today they must devote at least as

much attention to addressing the interior barriers that

their own country faces or even imposes (however

inadvertently) on the production and export of goods

and services.

The expanded issue base of trade policy can be

traced primarily to a redefinition of what is traded.

Until a few decades ago, the only recognized

tradeables were goods; trade meant only the

movement of goods across borders, and the only

available policy instruments were tariffs, quotas,

licensing requirements, outright prohibitions and

other measures that directly regulated exports and

imports of merchandise at the port of entry or exit. As

a consequence of technological changes and policy

reforms, trade policy now deals with the cross-border

movement of services, capital (i.e. investment), ideas

(i.e. intellectual property), and even people (i.e. the

movement of persons as investors, managers, and

service providers). The actions that countries take

to promote their industries and the commitments

that they make in trade agreements also go beyond

and behind the border. Trade policy is now linked to

more issues affecting the production, distribution, and

use of goods (e.g. labour rights and environmental

protection), and to still others in which the relationship

is controversial and determined by politics (e.g.

foreign policy and human rights). The subject matter

of trade is not just arithmetically larger, as the widening

scope means that the domestic and international

politics of trade have grown geometrically more

complex. Functions that could once be performed

by a small cadre of tariff specialists now require not

only a more highly trained and professional corps of

trade negotiators, but also the effective support and

participation of other domestic institutions that have

jurisdiction and expertise in other, more esoteric areas

of public policy.

B. GEOGRAPHY AND ECONOMIC COMPOSITION

Before addressing the grand strategy and precise

tactics of a country, or considering how it organizes

its institutions and defines it interests, it is necessary

to start with the most basic considerations. Some

characteristics of countries, such as their location or

geology, can never be changed; other aspects, such

as their economic composition, will change only slowly.

These are the givens that a country must begin with

when devising a TPF, as they each define the nature of

the challenges and opportunities that a country faces.

1. Composition of the economy

The classic means of describing any economy

is to consider the relative importance of its three

principal components. These are the primary sector

(i.e. agriculture, mining, forestry and fisheries),

the secondary sector (i.e. manufacturing and

construction) and the tertiary sector (i.e. services). For

the present purposes, the distinction between the first

and third categories is the starkest. At some risk of

oversimplification, economic development might be

defined as the process by which countries become

progressively less dependent on the primary sector

(especially agriculture) while the tertiary sector becomes

commensurately more prominent. This point can be

appreciated from the data in figure 2, which show

how the one sector diminishes and the other grows

as incomes rise. That same point can be appreciated

within different regions, as reported in tables 2 and 3.

II. TRADE AND DEVELOPMENT 11

The least agricultural developing economies are, on

average, 7.2 times richer than the most. Conversely,

the most services-intensive economies are 8.1 times

richer than the least. Both of these relationships hold

true across all three major developing regions and are

especially intense in Asia and the Pacific. While all

three sectors have contributions to make, no country

can properly be considered developed if it does not

possess a diverse and competitive services sector.

Countries that are excessively dependent upon exports

of one commodity, or a narrow range of primary goods,

face numerous challenges to their development.

Whether it is oil in Algeria, diamonds in Botswana,

copper in Zambia, or the canal in Panama, countries

do well not to depend too much on any one resource.

Policymakers often hope to promote diversification

of the economy, both vertically (i.e. moving up the

value chain for a given sector) and horizontally (i.e.

promoting the establishment and expansion of entirely

new industries that are not unduly dependent on the

country’s natural resource bases). Often the next

step in processing is obvious, whether that means

moving from raw to refined copper (Zambia) or from

fruits to fruit juices (Jamaica). The TPF for Rwanda, for

example, pointed to several specific steps that could

be taken to improve the country’s capacity to move up

the coffee value chain. These are all variations on the

promotion of infant industries. Like that broad strategy,

the relative value of this more specific policy depends

on the details. A policy that is properly designed and

implemented could well pay dividends, but one that is

poorly conceived or badly executed could be wasteful

and inefficient.

Diversification helps to expand the national economic

portfolio, and thus reduce the vulnerability to external

shocks, but it also requires that the country escape

from what is often called the “Dutch disease.” Originally

coined in 1977 by The Economist to describe the

decline of the Dutch manufacturing sector after the

discovery of natural gas in that country, this term is

now generally used to mean any situation in which an

unhealthy dependence on natural resource exports is

Figure 2. Shares of GDP in economic sectors, 2013 (Value added as a percentage of GDP)

Source: Agricultural value added as a percentage of GDP based on World Bank data at http://data.worldbank.org/indicator/

NV.AGR.TOTL.ZS; services value added as a percentage of GDP based on World Bank data at http://data.worldbank.org/in-

dicator/NV.SRV.TETC.ZS; services value added as a percentage of GDP based on World Bank data at http://data.worldbank.

org/indicator/NV.IND.MANF.ZS.

“All other” calculated by the author as the residual. Note that data on all countries are included in this figure; developed and

oil exporting countries are not excluded.

35

30

25

20

15

101985 1990 1995 2000 2005 2010 2015

High income MIddle income Least developed


Table 2. Relationship between the agricultural sector and income, 2015 (Average GDP per capita for non-oil developing countries)

Sources: Agricultural value added as a percentage of GDP based on World Bank data at http://data.worldbank.org/indicator/

NV.AGR.TOTL.ZS; GDP per capita calculated from World Bank data at http://data.worldbank.org/indicator/NY.GDP.PCAP.

CD.

Note: Data for some countries are based on 2014.

Small agricultural sectorLess than 5% of GDP

Medium-sized agricultural sector5–10% of GDP

Large agricultural sectorMore than 10% of GDP

Africa Income: $8 773

Number: 6

Income: $2 721

Countries: 7

Income: $1 001

Countries: 30

Americas Income: $13 863

Countries: 7

Income: $8 282

Countries: 10

Income: $4 543

Countries: 8

Asia and the Pacific Income: $34 008

Countries: 4

Income: $7 687

Countries: 4

Income: $2 566

Countries: 12

Total Income: $14 018

Countries: 17

Income: $6 315

Countries: 21

Income: $1 943

Countries: 50

Table 3. Relationship between the services sector and income, 2015 (Average GDP per capita for non-oil developing countries)

Sources: Services value added as a percentage of GDP based on World Bank data at http://data.worldbank.org/indicator/

NV.SRV.TETC.ZS; GDP per capita calculated from World Bank data at http://data.worldbank.org/indicator/NY.GDP.PCAP.CD.


Small agricultural sectorLess than 5% of GDP

Medium-sized agricultural sector5–10% of GDP

Large agricultural sectorMore than 10% of GDP


Number: 20

Income: $2 250

Countries: 21

Income: $8 851

Countries: 4

Americas Income: —

Countries: 0

Income: $6 971

Countries: 16

Income: $12 264

Countries: 8


Countries: 6

Income: $5 986

Countries: 11

Income: $28 432

Countries: 4


Countries: 26

Income: $4 680

Countries: 48

Income: $15 453

Countries: 16

associated with a decline in the price competitiveness

of a country’s manufacturing or agricultural sectors. An

increase in revenues from those primary exports could

strengthen the national currency to the point where

the country’s other exports become too expensive

to compete on world markets. Concerns over this

problem lead some countries to develop proposals by

which the revenues from extractive industries would

be directed to export-diversification projects. Investing

in alternative sectors, it is hoped, can help sustain

growth, diversify risk, and ensured that non-renewable

natural resources are more of a blessing than a curse.

Promote inclusive and sustainable industrialization

and, by 2030, significantly raise industry’s share of

employment and gross domestic product, in line with

national circumstances, and double its share in least

developed countries.

Support domestic technology development, research and

innovation in developing countries, including by ensuring

a conducive policy environment for, inter alia, industrial

diversification and value addition to commodities.

Two of the eight targets under Sustainable Development

Goal 9:

INDUSTRY, INNOVATIONAND INFRASTRUCTUREBuild resilient infrastructure, promote

sustainable industrialization and foster innovation


This does not mean that a country ought to do

whatever it can to reduce the size of its primary sector,

or to inflate its tertiary sector. What it does suggest is

that there is a well-established pattern to the process

of economic development, with countries upgrading

the complexity and sophistication of their production

from the most basic and fungible goods to the more

distinct and differentiated activities. They need not

eliminate their primary sectors, which may continue

to play important roles even in the most advanced

economies. An efficient primary sector, be it based on

agriculture or other raw commodities, may be vital to

a country’s food security, its exports and its supplies

to other industries.

How important is manufacturing to development?

There is no doubt that most developed countries

today went through a progression by which industry

gradually eclipsed agriculture and was then eclipsed

in turn by services. The data illustrated in table 2 also

imply that the manufacturing sector tends to follow an

arc as a country develops. The association between

manufactures and development is so common that

the term “industrialized” is still used as a synonym for

“developed”, despite the fact that services are now

five times larger than manufactures in the average

developed country. The Sustainable Development

Goals call for the promotion of inclusive and sustainable

industrialization in developing countries, as well as the

advancement of industrial diversification and value

addition to commodities. It is nonetheless worth noting

that there are some developing countries that were

once devoted principally to primary products and now

have large services sectors, typically in tourism and

associated fields. Some of those countries have little

experience with manufacturing, either now or in the

past, and in many cases their historical attachment

to industry consisted largely of apparel production.

That industry was artificially distributed throughout

the world by a system of import quotas in the latter

half of the twentieth century but has been greatly

consolidated in the years since the quotas were lifted.

The services sector is not the only main economic activity

in Jamaica but has been the driver of economic growth

in the last 20 years. With the exception of the 1990s, the

growth rate of services outpaced both agriculture and

industry.

Trade Policy Framework: Jamaica (2015)

These are among the many issues for which each

country’s experience and prospects will vary. A TPF

needs to provide detailed information on the evolution

and current status of a country’s primary, secondary

and tertiary sectors. Due consideration should be

given to the arc of development for specific industries

in each of these broad sectors, based on the answers

to a series of questions. Are there sunset industries in

which the country has lost competitiveness? If so, is

that the consequence of inexorable processes (e.g.

the depletion of a natural resource), thus implying

that the country should prepare for a phase-down in

those operations? Or is the industry in the doldrums

for identifiable and reversible reasons, thus implying

that wise investments can be made in revitalizing its

prospects? Are there important sunrise industries on

the horizon, and what might be done to facilitate or

promote new investment and productivity in these

areas? Most important of all, are there steps that the

country can take in trade and other areas of public

policy that can help to ease the transition or reverse

the decline, and to accelerate the development of

industries that are on the rise?

A TPF should devote as much attention to the tertiary

sector as it does to the primary and secondary sectors.

Services are important not just as potential earners

of foreign exchange, but as vital contributors to the

competitiveness of other industries. Producers in the

primary and secondary sectors can quickly be stifled if

they do not have access to high-quality and affordable

services in transportation, banking, and legal services.

In devising a TPF, countries should consider not only

the development of their own tertiary sectors, but also

the contributions that foreign providers of services

can make to the development of their primary and

secondary sectors. Restrictions in this area can, in

some cases, be just as self-defeating as barriers to

the importation of raw materials.

Moving from the descriptive to the prescriptive,

what types of policies might be most appropriate for

countries that have differing mixes of these sectors?

It might be comforting to imagine that devising an

appropriate trade and development strategy by

calibrating the ends and means of policy to the relative

size of mining or manufacturing, but the differing

experiences of specific countries suggests instead that

this is a sui generis process unique to each economy.

Consider the case of Panama, where the economy in

general and the services sector in particular have done

well in recent years. Panamanian growth over the last


decade has more than double the regional average,

and is reflected in numerous services associated

with the external sector (e.g. the Panama Canal, the

Colon Free Zone, ports, air transport, and tourism).

One might well imagine that this success story points

to the importance of fostering the tertiary sector and

promoting the economic transition, and yet in this

specific case, the TPF implied that some degree of

rebalancing was in order. The report stressed that the

shares of the manufacturing and agricultural sectors

have declined, to the detriment of the working poor in

both urban and rural areas. Panamanian policymakers

now consider it desirable and feasible to stimulate the

exportation of agricultural and manufactured goods

with high levels of domestic value added. That will,

according to the TPF, favour the laggard primary and

secondary sectors, while also aiding areas outside of

the country’s interoceanic corridor.

Achieve higher levels of economic productivity through

diversification, technological upgrading and innovation,

including through a focus on high value added and

labour-intensive sectors.

Promote development-oriented policies that

support productive activities, decent job creation,

entrepreneurship, creativity and innovation, and

encourage the formalization and growth of micro, small

and medium-sized enterprises, including through access

to financial services.

Two of the 12 targets under Sustainable Development

Goal 8:

Promote inclusive and sustainable economic growth, employment and

decent work for all


Table 4. Relationship between access to the sea and income (Average GDP per capita for non-oil developing economies)

Sources: Calculated from World Bank data at http://data.worldbank.org/indicator/NY.GDP.PCAP.CD. List of landlocked

countries from the United Nations Office of the High Representative for the Least Developed Countries, Landlocked Developing

Countries and Small Island Developing States at http://unohrlls.org/about-lldcs/country-profiles/.

Islands, isthmuses and peninsulas

Coastal countries Landlocked countries


Countries: 6

Income: $2 419

Countries: 28

Income: $1 183

Countries: 16


Countries: 12

Income: $7 519

Countries: 15

Income: $3 628

Countries: 2


Countries: 19

Income: $3 507

Countries: 9

Income: $1 928

Countries: 5


Countries: 37

Income: $4 078

Countries: 52

Income: $1 558

Countries: 23

Conclusions of this sort militate against any

expectation that one might devise a simple set of

universal guidelines for all countries that are based on

unidimensional considerations such as the sectoral

composition of the economy. The task of the TPF

is instead to consider these and other factors in

their entirety in order to determine the nature of

the challenges that the country faces and how its

resources might best be redirected.

2. Access to the sea

A TPF needs to take into account the most basic

issues affecting a country’s prospects, including its

location and geographic characteristics. Economists

have always recognized, for example, that access to

the sea is an important factor in determining a country’s

ability to trade. According to Adam Smith (1776: 32),

“it is upon the sea coast … that industry of every kind

naturally begins to subdivide and improve itself, and

it is frequently that not till a long time after that those

improvements extend themselves to the inland parts”.

Modern economists agree that location is critical.

Economic development is “shaped very importantly

by the biophysical and geophysical characteristics of

economies”, according to McCord and Sachs, with

incomes differing “in no small part because of sharp

differences across regions in the natural resource

base and physical geography (e.g. distance to coast),

and by the amplification of those differences through

the dynamics of saving and investment”.3

The data in table 4 confirm that countries’ access to

the sea is closely related to their levels of success. In-

come levels in islands, isthmuses and peninsulas are

three times higher than they are in the merely coastal


countries and almost eight times higher than they are

in landlocked countries. There are of course exception-

al cases of islands that are relatively poor, as well as

landlocked countries that are relatively rich, but “excep-

tional” is the key word. This distinction speaks to the

importance of trade in development, insofar as those

countries for which sea lanes are nearer and trans-

portation costs are lower will typically have not only a

greater propensity to trade but may also do so at lower

cost. Landlocked countries are obliged to look to their

neighbours for access to shipping facilities, and even

if that access is relatively easy, their trade costs will in-

evitably be higher than those faced by coastal coun-

tries. This distinction also concerns the advantages

that countries may enjoy in lucrative services sectors.

In some countries, access to the sea might equate to

an abundance of sun, sand, and surf. Tourism is an

especially important sector for several of the more eco-

nomically successful small island countries. Being an

island may not guarantee the attraction of tourists, but

it is undeniably an asset for many countries.

Access to the sea is thus a critical issue to take into

account when devising the trade policy framework

for any country. Those that enjoy this feature have an

opportunity that they would do well to develop and to

exploit, both for their own industries and (if they should

have landlocked neighbours) for their regions; those

that lack it must find ways to overcome this obstacle.

This one factor may outweigh almost all others, apart

perhaps from endowments of mineral resources, in

its capacity to shape the opportunities available to

countries. The point here is not that policymakers in

island countries need do nothing in order to prosper,

nor that their counterparts in landlocked countries

should throw up their hands in despair. The implication

is that planning should start from the realization that

any country’s challenges and opportunities will be

shaped in the first instance by their geographic realities,

and that these realities must be acknowledged and

addressed directly.

While it would go too far to claim that geography is

destiny, it is evidently a major element in countries’

challenges and opportunities. The most important

issue here is not whether countries enjoy or do not

enjoy this singular advantage, but rather what steps

they take either to make the most of this advantage

or — if they lack it — to make up for the deficit. When

preparing a TPF, researchers would do well to consider

how this factor has worked into the calculations made

by their counterparts in other countries. Some TPFs

explicitly deal with the consequences of being an

island or landlocked. While the Jamaica document

observed that in some respects the country’s status

as a small island State places it at a disadvantage,

the TPF went on to promote a logistics hub initiative

“that seeks to position Jamaica as the fourth node

in global logistics (after Singapore, Rotterdam and

Dubai)” in order “to push Jamaica to the centre of the

global supply chain of the Americas” (p.75). Similarly,

the TPF for Namibia stresses the development of

transport corridors at the Port of Walvis Bay, and the

Trans-Kalahari, Trans-Caprivi, Trans-Cunene, and

Trans-Oranje regions. These corridors “are strategic

to give a competitive positioning to Namibia as a

transport hub for all regional and international trade

between Southern African Development Community

(SADC) countries, Europe, the Americas and beyond,”

according to the TPF (p.37), and the Government also

“intends to develop an international logistics hub for

SADC” and “has already commissioned a project on

the master plan for development of an international

logistics hub”.

Facilitate sustainable and resilient infrastructure

development in developing countries through enhanced

financial, technological and technical support to African

countries, least developed countries, landlocked

developing countries and small island developing States.

One of the eight targets under Sustainable Development

Goal 9:INDUSTRY, INNOVATIONAND INFRASTRUCTUREBuild resilient infrastructure, promote


Adequate trade policy will spur further growth and boost

employment, incomes and exports. However, trade policy

in Zambia must take the country’s specific difficulties and

special circumstances into account in its design and

implementation. The country has a small, resource-based

internal market, widespread poverty and is landlocked

with long distances to major ports.

Trade Policy Framework: Zambia (2016)

3. Other permanent or long-term characteristics

There are many other characteristics that might serve

to enhance or retard a country’s prospects for devel-

opment, and hence should be addressed in a TPF.

In addition to its resource endowments (e.g. mineral

deposits and arable land), these include such diverse

factors as its climate, ecological diversity, demograph-

ic profile and susceptibility to natural disasters (e.g.


hurricanes and earthquakes). Depending on the spe-

cific circumstances of a country, any or all of these

characteristics may merit close attention, together

with analysis of how they affect its prospects and what

steps might be advisable to deal with them.

Countries may be distinguished, for example, according

to their colonial heritage and the institutions that they

inherited from that past. One of the most important

of those institutions is language. In a global economy

where English is unofficially the language of commerce

and diplomacy, those countries where this tongue is

predominant may enjoy certain advantages. They may

be perceived as preferred destinations on the part of

tourists from English-speaking countries, and potential

investors from those same countries may also tend

to favour partners in which communications will be

simpler and legal systems may more closely resemble

their own. Anglophone countries may also enjoy an

advantage in the establishment of some ventures in

which language skills are critical (e.g. call centres for

reservations and customer service). The raw numbers

support a correlation between economic opportunities

and language. Among non-oil developing countries,

the average income in English-speaking countries was

$7,716 per capita in 2015. That was 35.5 per cent

higher than the levels in developing countries where

Dutch, French, Portuguese, or Spanish was spoken,

and 80.1 per cent higher than in countries where non-

European languages were spoken.4

While language may be considered a long-term

characteristic of a country, it can also be addressed

through education. One key issue that merits close at-

tention in a TPF is how well the educational system of

a country serves to prepare young persons for com-

petition in a global economy, including their facility with

languages. The same may be said for computer liter-

acy, business and engineering skills, and other topics

that should be taught to persons about to enter the

national and worldwide marketplace of skills. The time

horizon for the payoffs in education may be somewhat

longer than those for infrastructure projects, but these

investments may ultimately be the most important

ones that a country can make in its own development.

C. RELATIONSHIP BETWEEN INCOME, EXPORTS AND OPEN MARKETS

What is the relationship between trade and

development? For many observers and policymakers,

the instinctive answer to that question is the simplest:

Exports are assumed to be a benefit to the country, but

imports represent a drain on national resources and

a discouragement to local industry. That mercantilist

outlook is by no means limited to developing countries,

as variations on this theme are commonly heard in

countries at all levels of income. But is it true?

The data presented below do support the first half of

that assertion, insofar as there is a close relationship

between high levels of income and high levels of ex-

ports, but the second half is much more controversial.

Nearly all countries have sought at one time or another

to stimulate local production and employment through

restrictions on imports, including most countries that

are now either developed or among the higher-in-

come developing countries. It is only at later stages

that countries typically move towards a more mar-

ket-oriented approach, including the autonomous or

negotiated reduction of their trade barriers. There are

nonetheless a few examples of successful countries

that committed themselves early to open markets, as

well as evidence to suggest that restrictions on im-

ports may be self-defeating. Protection can be costly

not only to consumers but to export-oriented indus-

tries, introducing an anti-export bias in an economy.

The ideas and information presented in this section

cannot resolve the perennial debate over what type of

trade policy will best promote economic development.

It nevertheless seeks to summarize the key points in

that debate by reviewing the data on how development

is associated with exports and economic freedom,

relating the arguments advanced by the principal

schools of thought and comparing the experiences of

a few success stories.

1. Higher exports are associated with higher income

The data presented in table 5 support the contention

that successful countries export more. On average,

income levels are seven times higher in the countries

that depend the most on exports than they are in the

countries that depend the least. This disparity is even

wider in some quarters, with incomes in the most

export-dependent countries in Asia and the Pacific

being fully 10 times higher than in that region’s least

export-dependent countries; the difference in the

Americas is much smaller (just 1.7 times).

The data in table 6 do not show an equally close

relationship between imports and income. Levels of


income are still positively associated with this side of

trade dependence, but the differences are not large.

This may be partly explained by the fact that there are

two very distinct types of countries with high levels

of import dependence. On the one hand, this group

includes those relatively small and poor countries that

are obliged to import large quantities of food and other

goods to meet domestic needs, much of which may

be financed through grants and concessional loans;

imports in these countries often exceed exports by

a considerable degree. On the other hand, the more

import-dependent group also includes some relatively

rich, export-oriented economies that import raw and

semi-processed materials for incorporation into the

goods that they ship abroad. By mixing comparatively

rich and poor countries together, the averages offer a

misleading muddle.

L’ouverture ne fait pas le développement mais le

développement ne peut se faire sans elle. (Openness

does not develop, but development cannot be achieved

without it.)

Trade Policy Framework: Algeria (2016)

2. Defining a country’s strategic orientation

It is safe to assume that leaders in all developing

countries would prefer to achieve the levels of income

enjoyed among the developed countries, and it is

nearly as safe to assume that they are prepared at

some point to open their markets as much as those

countries have already done. The more difficult question

is precisely when that opening is best achieved.

Table 5. Relationship between exports and income, 2015 (Average GDP per capita for non-oil developing countries)

Sources: Exports of goods and services as a percentage of GDP based on World Bank data at http://data.worldbank.org/

indicator/NE.EXP.GNFS.ZS; GDP per capita calculated from World Bank data at http://data.worldbank.org/indicator/NY.GDP.

PCAP.CD.


Low export dependenceLess than 25.0% of GDP

Medium export dependence25.1–50.0% of GDP

High export dependenceMore than 50.0% of GDP

Africa Income: $927

Number: 18

Income: $2 521

Countries: 21

Income: $8 684

Countries: 4


Countries: 8

Income: $8 831

Countries: 19

Income: $13 268

Countries: 1


Countries: 11

Income: $6 293

Countries: 9

Income: $24 777

Countries: 10


Countries: 37

Income: $5 661

Countries: 49

Income: $19 718

Countries: 15

Table 6. Relationship between imports and income, 2015 (Average GDP per capita for non-oil developing countries)

Sources: Imports of goods and services as a percentage of GDP based on World Bank data at http://data.worldbank.org/

indicator/NE.IMP.GNFS.ZS; GDP per capita calculated from World Bank data at http://data.worldbank.org/indicator/NY.GDP.

PCAP.CD.


Low import dependenceLess than 25.0% of GDP

Medium import dependence25.1–50.0% of GDP

High import dependenceMore than 50.0% of GDP


Number: 3

Income: $1 668

Countries: 22

Income: $4 260

Countries: 14


Countries: 4

Income: $8 666

Countries: 15

Income: $8 752

Countries: 10


Countries: 3

Income: $13 524

Countries: 12

Income: $9 875

Countries: 15


Countries: 10

Income: $6 714

Countries: 49

Income: $7 571

Countries: 39


There is no contesting the fact that most of the same

developed countries that today advocate a market-

oriented development strategy, including a liberal

orientation towards trade, took different approaches at

earlier stages in their own development. Most of them

employed protectionist measures in the nineteenth and

early twentieth centuries, and vestiges of those earlier

policies remain in place for a few sectors that are still

highly insulated from foreign competition. The same

A business-friendly investment environment can be

a very crucial element of supporting domestic and

foreign investments. Jamaica has been improving its

business environment by simplifying its regulations and

procedures, and creating a more business friendly climate

… Nevertheless, further improvements are possible by

enhancing the quality of the institutional environment,

governance and regulatory framework, and reducing

bureaucracy and corruption.

Trade Policy Framework: Jamaica (2015)

Box 3. Three classical positions on trade and development

For all that has changed in the world over the course of three centuries, the terms of the debate on trade and development

are essentially the same as they were ever since Adam Smith provided the original argument for open markets, Alexander

Hamilton offered a more State-centric riposte and Friedrich List proposed a sequential approach.

Smith argued in The Wealth of Nations (1776) that the true objective is not to build up surpluses and specie in a perpetual

and zero-sum struggle, but instead to enhance the productivity of all countries through cooperative exchange. That is

best done by achieving a rational division of labour both at home and abroad, which in turn requires that countries remove

the barriers that inhibit specialization. David Ricardo replaced Smith’s simple model of absolute advantage, making the

more persuasive argument for comparative advantage in his Principles of Political Economy and Taxation (1817), and

later authors offered further elaborations. The core pro-market message, however, remains unchanged: All countries may

benefit if they each play to their strengths, remove their barriers and find their place in a global division of labour.

Hamilton served as the first secretary of the treasury in the first developing country of the early modern era. Recognizing

that the United States was a post-colonial country with a large primary sector, an undeveloped manufacturing sector

and a history of dependence on a distant metropolis, Hamilton argued in his seminal Report on Manufactures (1791) that

joining the international division of labour might mean remaining on the lowest rungs of the economic ladder. He is best

known for devising the “infant industry” argument for protection, advancing a positive role for a State that would intervene

with tariffs, subsidies and other tools to support the birth and growth of new industries. In the mid-twentieth century, Raul

Prebisch would revive Hamilton’s arguments regarding the tendency for the terms of trade to work against the interests

of countries that export raw materials and import finished goods. This became the foundation for Prebisch’s advocacy of

import-substitution industrialization.

List believed that the Smith and Hamilton prescriptions might each be appropriate in their time, depending on a country’s

level of economic development. In The National System of Political Economy (1844), he contended that countries naturally

go through stages of development and that there are specific strategies appropriate to each of these phases. Countries

must “modify their systems according to the measure of their own progress”, he believed, adopting free trade in the

first and last stages. In the middle stage, however, a country should employ trade restrictions and other interventionist

measures to promote the development of industry. That same country could “gradually rever[t] to the principle of free trade

and of unrestricted competition in the home as well as in foreign markets”. The only major difference is in what List and his

modern successors advise for the poorest countries: Whereas List believed that the level of protection should move from

low to high and then back to low, his modern descendants argue that countries should start with high levels of intervention

and then lower them as they develop.

may be said of some developing countries that are

in the final stages of transition to developed-country

status. One may certainly view with some scepticism

any advice that amounts to a recommendation that

“you ought to do as I say, not as I did”. The more

important issue is whether this advice, despite its self-

serving appearance, is nevertheless correct.

The major schools of thought on this issue have an

intellectual pedigree that dates back more than two

centuries. As summarized in box 3, all three of them

were established by the middle of the nineteenth

century. While each of these doctrines have evolved

over the ensuing years, the essential choices remain

the same. Countries may opt to give the State the

principal role in guiding the economy and directing

trade, or leave the main decisions up to the market,

or take a sequential approach in which the degree of

market orientation expands (and the role of the state

recedes) as the country ascends the economic ladder.


The default strategy of most European countries from

the sixteenth through the eighteenth centuries was

classical mercantilism. This was a power-oriented

doctrine by which the State manipulated trade in order

to promote selected industries, achieve trade surpluses

and accumulate precious metals. Adam Smith argued

that mercantilism is inefficient and that the true wealth

of nations is not a country’s accumulated reserves, but

resides instead in its efficiency and productivity. By this

view, all countries would benefit from open markets

and a global division of labour where each country

produces those things in which it has an advantage.

Alexander Hamilton then restated the mercantilist

position in a new way, arguing that Smith’s approach

would benefit only the established manufacturing

economies and consign the developing countries

to a perpetually inferior position. He favoured an

activist State that would use import restrictions and

other tools to promote infant industries. List provided

a synthesis of these views, believing that a rising

country can benefit from protection and other forms of

intervention, but that a country would be equally well

advised to adopt more open policies once it achieves

a high level of competitiveness.

All three of these positions have their modern

proponents. Policymakers and economists in nearly

all developed countries today advocate economic

liberalism, joining Smith to argue that developing

countries will do best by finding their own niche in

a global market. That same argument has been

persuasive in some developing countries, but is

not as popular in those quarters as the Hamiltonian

policy of import-substitution industrialization. As

for List’s sequential approach, Ha-Joon Chang is

its most prominent modern proponent. Taking the

title of Kicking Away the Ladder from one of his

German predecessor’s more colourful passages, he

argues that the developed countries that now decry

protectionism in developing countries are exercising

historical hypocrisy. The “bad policies” that most

now-developed countries “used so effectively when

they themselves were developing should at least be

allowed, if not actively encouraged”, he urges. Chang

acknowledges that while activist industrial, trade, and

technology policies “can sometimes degenerate into a

web of red tape and corruption, this should not mean

that therefore such policies should never be used”.5

For the purposes of this manual, the clearest

comparison is between Smith’s economic liberalism

and the two-stage sequence that List and Chang

promoted. The key question can thus be simply stated:

Would developing countries be best advised to do as

Smith argued, opening up their markets early, or would

they benefit instead from the type of calibration that List

proposed and Chang now reiterates? The question

cannot be answered definitively just by showing that

developed countries previously resorted to state-

centric development strategies and protectionist trade

policies. While that point is historically indisputable, it

does not necessarily follow that the now-developed

countries opted for the optimal policy mix. The List-

Chang thesis suggests that these countries developed

because they offered a protective shield for their infant

industries, but a free trader would retort that they

ultimately did so despite policies that stifled innovation

and insulated inefficient producers from the benefits

of real competition. Did trade barriers and subsidies

accelerate the development of their industries, or are

pro-trade advocates correct in arguing that these were

wasteful efforts that merely encouraged corruption,

prolonged the demise of inefficient industries and

postponed the emergence of competitive exporters?

3. When should an economy open?

One way to address this question is to review

the experiences of four Asian economies that, as

summarized in table 7, offer practical demonstrations

of the competing approaches. Hong Kong (China)

committed to the market strategy while it was still a

colony of the United Kingdom of Great Britain and

Northern Ireland, with no barriers to trade and very

little other state intervention in the market. Singapore

did experiment briefly with import-substitution policies

upon achieving its independence, but quickly moved

towards openness. By contrast, Japan and then the

Republic of Korea pursued essentially mercantilist

strategies for most of the twentieth century, using

import restrictions and other instruments to promote

favoured industries. It was only after they achieved

high levels of development, and also came under

increasing pressure from their partners, that these two

countries adopted more market-oriented policies.

The data show that all four of these economies would

be considered successful by any reasonable standard,

and all are now predominantly dedicated to free trade

(with the notable exception of protection of agricultural

sectors for Japan and the Republic of Korea). They are

all leaders in the exportation of high-technology goods,

and none of them impose high barriers to imports of

non-agricultural goods. All of them are actively en-


gaged in multilateral trade negotiations, and all except

Hong Kong (China) are also involved in several regional

initiatives. The economies differ in the degree to which

they depend on trade, with the share of trade in GDP

being several multiples higher in Hong Kong (China)

and Singapore than it is in Japan and the Republic of

Korea, and also in the extent to which they comple-

ment trade openness with other pro-market policies.

Depending on a person’s perspective, Hong Kong

(China) and Singapore could be seen either as

pioneers or as exceptional cases (sometimes called

“black swans”). The conclusions that might be reached

from the evidence depend on the aspect that are

considered most important. The strongest argument

from a Smithian perspective comes in the final results:

Income levels in Hong Kong (China) and Singapore are

far above those in Japan and the Republic of Korea,

and the speed with which they developed is even more

impressive than what their East Asian neighbours

achieved. By contrast, the strongest argument from

a Listian perspective comes in the initial differences:

Hong Kong (China) and Singapore are more like city

States than large and diverse countries, have virtually

no agricultural hinterland, generally depend on others

for national defence, and enjoy the aforementioned

special advantages of islands, isthmuses and

peninsulas. There are few other polities, whether in

modern times (e.g. Dubai and Macao, China) or in

history (e.g. Athens and Venice), that might be directly

compared to them. It could therefore be argued that

they offer not a model that most other developing

countries can reasonably hope to emulate, but a pair

of sui generis cases that ultimately rest on special

circumstances.

It may not be possible for other developing countries

to replicate all of the elements that went into the

success stories of Hong Kong (China) and Singapore,

but there are some elements of their formula that merit

close attention. They both score considerably higher

on the index of economic freedom than do Japan and

the Republic of Korea. Countries’ place on this index,

which is based on 10 quantitative and qualitative

factors grouped into four broad categories,6 correlate

closely with their levels of income (table 8). Hong Kong

(China) and Singapore are the only two developing

economies classified as fully “free” on this index, a

Table 7. Characteristics of four Asian economies

Sources: GDP per capita: World Bank data at http://data.worldbank.org/indicator/NY.GDP.PCAP.CD; average MFN Tariffs:

WTO at http://stat.wto.org/TariffProfile/WSDBTariffPFHome.aspx?Language=E; exports: World Bank at http://data.world-

bank.org/indicator/NE.EXP.GNFS.ZS; imports: World Bank at http://data.worldbank.org/indicator/NE.IMP.GNFS.ZS; index of

economic freedom: Heritage Foundation at http://www.heritage.org/index/ranking; area: World Bank at http://data.world-

bank.org/indicator/AG.LND.TOTL.K2; population: World Bank at http://wdi.worldbank.org/table/2.1; agriculture: World Bank

at http://data.worldbank.org/indicator/NV.AGR.TOTL.ZS/countries.

Note: Data are for 2015 when available, or otherwise for 2013 or 2014.

Early commitment to free trade Two-stage trade strategy

Hong Kong (China) Singapore Japan

GDP per capita $42 423 $52 888 $32 477 $27 222

Average MFN tariffs:

On non-agricultural goods 0.0% 0.0% 2.6% 6.8%

On agricultural goods 0.0% 1.4% 19.0% 52.7%

Shares of GDP:

Exports of goods and services

201.2% 176.5% 17.9% 45.9%

Imports of goods and services

198.8% 149.6% 18.9% 38.9%

Index of economic freedom 1st in world 2nd in world 22nd in world 27th in world

Area in square kilometres 1,104 697 377,915 99,720

Population 7.2 million 5.5 million 127.1 million 50.4 million

Agriculture as a share of GDP 0.0% 0.0% 1.2% 2.3%


distinction shared by only three developed countries

(i.e. Australia, New Zealand and Switzerland). Average

incomes in these two economies are 18.9 times

higher than they are in the developing countries that

are classified as mostly unfree or repressed. There

is also a stepped progression in which incomes are

higher in the group of moderately free countries than

they are in the least open, and higher still among those

that are classified as mostly free.

It is important to note that the correlation between

income and a country’s place on this index is stronger

than the one observed earlier with respect to income

and trade dependence. This implies that trade policy

is best seen not as a wholly independent variable, but

as a component in a wider set of economic policies.

Taking the broadest view, a country’s approach to

trade is one aspect of the largest decision that every

Government must make in its economic policies,

namely the roles that it will assign to the market

and to the state in determining what is produced,

consumed, imported, and exported. That point is

equally valid for those countries that give a leading

Table 8. Relationship between economic freedom and income (Average GDP per capita for non-oil developing countries)

Sources: Economic freedom based on Heritage Foundation data at http://www.heritage.org/index/ranking; GDP per capita

based on World Bank data at http://data.worldbank.org/indicator/NY.GDP.PCAP.CD.

Free Mostly free Moderately free Mostly unfree

Africa Income: —

Number: 0

Income: $7 739

Countries: 2

Income: $3 758

Countries: 8

Income: $1 777

Countries: 35

Americas Income: —

Countries: 0

Income: $12 525

Countries: 4

Income: $8 332

Countries: 13

Income: $5 313

Countries: 9


Countries: 2

Income: $38 524

Countries: 3

Income: $10 257

Countries: 6

Income: $2 561

Countries: 19


Countries: 2

Income: $20 128

Countries: 9

Income: $7 405

Countries: 27

Income: $2 519

Countries: 63

[I]mport substitution implies raising costs and, perhaps

temporarily, reducing efficiencies plus domestic availability

of the commodities concerned. If temporary, these

effects could be absorbed, presumably, but if they are

not temporary then they risk compounding the horizontal

deficits listed here, and more. It is difficult to see how that

would promote Namibia’s sustainable integration into the

global economy on a long-term competitive basis.

Trade Policy Framework: Namibia (2016)

role to the Government, others that prefer to let the

market decide, and those that are in a transition from

one emphasis to the other. The observed relationship

underlines the view that a modern, developed

economy that aims to compete effectively in the global

market will have at its base efficient and well-governed

institutions that facilitate, but do not seek to control,

the development of private enterprise. What remains

at issue is how far, and for how long, a country should

rely on governmental direction and intervention to

achieve that level of development. That is a core

question to be answered in each TPF.


IIIInstruments of trade pol icy

Table 9. Instruments that countries may use to influence trade

Table 9. Instruments that countries may use to influence trade

Note: Measures that are beyond the border include those imposed on goods prior to their shipment to the importing country

(e.g. pre-shipment inspection).

a Denotes a measure that may not and, according to WTO agreements, should not be employed with the aim of affecting trade.

Such measures may nonetheless affect imports and exports indirectly.

Aim or effect of the measure

Discourage imports or exports Encourage imports or exports

Where measure is deployed

At border

– Tariffs

– Quotas and tariff-rate quotas

– Rules of origin

– Trade-remedy laws

– Bans on counterfeit goods

– Taxes, bans and other restrictions

on exports

– Preferential tariff treatment

– Preferential quota treatment

– Trade facilitation

– Duty drawbacks

– Export-processing or free zones

– Export subsidies

– Waivers on duties

Behind or beyond border

– Taxes

– Sanitary and phytosanitary

measuresa

– Technical barriers to tradea

– Price controls

– Trade-related investment measures

– Restrictions on distribution

– Preferential government

procurement

– Tax concessions

– Investments in infrastructure

– Production subsidies

– Stockpiling

– Foreign assistance that is provided

in kind or otherwise tied

The following is a review of the tools that countries

may use in pursuit of their objectives. This analysis is

not limited to the tariffs and other border measures

that the country itself may use as instruments of

trade policy. A TPF should examine all measures that

the country employs, as well as those of its trading

partners, that affect the ability to produce, export, and

import goods and services, including those that are

used for purposes other than commerce per se.

A TPF should provide a thorough review of all such

measures at home and abroad. Those employed

by the country itself should be reviewed with a view

towards their improvement and adjustment, which

may lead to recommendations for changes in laws,

regulations, budgets or policies. The barriers, subsidies

or other interventions that are employed by a country’s

trading partners might variously be addressed through

negotiations or other representations to the partner,

or — in extreme cases — could merit the adoption of

countermeasures or the pursuit of complaints in the

WTO’s Dispute Settlement Body.

The more important of these tools are summarized in

table 9, distinguishing them according to what they

aim to achieve and where they are implemented. The

measures that are imposed at the border are typically

instruments of trade policy (narrowly defined), but

many of those that are behind the border may be

motivated primarily by other goals and might be only

incidentally related to trade. Some of these instruments

are wholly in the hands of government, while others

(notably the trade-remedy laws) are usually triggered

by petitions from the private sector. Whatever the

rationale behind these various instruments, together

they give countries a large toolbox that they might

open whenever they think it is time to intervene in

domestic and international markets.

There is no hierarchy among the instruments shown

in table 9, as their relative importance to countries

will vary according to their circumstances. Countries

differ with respect to their locations, geographic types

and endowments of natural and human resources,

and also show a great diversity in the depth and

composition of their economies and the structure of

their political institutions. All of these considerations

affect the relative importance attached to any given

instrument. There are some countries in which tariffs

remain an important instrument of industrial policy,


for example, and may also be a major source of

government revenue, while other countries impose few

or no taxes on imports and exports. The same might

be said of other implements that figure prominently in

the toolboxes of some countries, and are altogether

absent in others.

A. MEASURES AFFECTING THE MOVEMENT OF GOODS

The most traditional focus of a trade ministry is on

those policy instruments that regulate the movement

of goods at the border. Tariffs are the most obvious of

these tools, but they are of diminishing importance in

many markets. Other matters affecting the movement

of goods, such as customs procedures and basic

infrastructure, are increasingly critical determinants of

countries’ export competitiveness.

1. Tariffs

Apart from exceptional cases such as Hong Kong

(China), virtually all countries impose tariffs on imports.

Some also employ export taxes, but these tend to be

applied only to raw commodities that are exported by

certain developing countries. Countries sometimes

impose additional taxes, fees and other charges on

imports, such as those associated with the processing

of merchandise by customs officials. For the sake

of simplicity, only traditional tariffs on goods will be

examined here.

Tariffs have been the most important tool of trade

policy for centuries, and in many countries they remain

a significant source of government revenue. The legal

commitments that some developing countries now

make to reduce or even eliminate tariffs, whether

on a bilateral or multilateral basis, are a relatively

recent development. During most of the GATT period

(1947–1994) few of these countries were contracting

parties to the agreement, and most of those that were

in GATT made minimal commitments. Most of their

tariffs were unbound (i.e. there were no upper limits

placed on the levels of their tariffs), their bound tariffs

typically had a great deal of “water” in them (i.e. the

bound level was well above the actual level at which

tariffs were applied), and they rarely signed on to the

non-tariff agreements emerging from a GATT round.

That all changed in the Uruguay Round (1986–1994),

in which most developing countries made significant

commitments. Those negotiations, which coincided

with the pro-market Washington Consensus and

transformed GATT into WTO, also introduced the

“single undertaking” as the basis for multilateral

negotiations. That rule requires that all WTO members

sign on to all of the agreements that emerge from a

negotiating round. Commitments have been even

deeper for those countries that acceded to WTO after

1995. Beyond their multilateral commitments, many

developing countries have negotiated RTAs with one

or more of the major economies. These agreements

generally provide for the phase-out of most tariffs

imposed on qualifying imports from partners to the

agreement.

The net result is that average tariff rates today are

much lower than they were in past generations, both

for developed and developing countries, but those

averages mask significant variations among countries.

This can be appreciated from the data in tables 10

and 11, which show the average most favoured nation

Table 10. Relationship between non-agricultural tariffs and income, 2014 (Average GDP per capita for non-oil developing countries)

Sources: Average tariffs from WTO (2015); GDP per capita calculated from World Bank data at http://data.worldbank.org/

indicator/NY.GDP.PCAP.CD. Note that data for some countries refer to 2013.

Note: Tariffs are simple averages for applied MFN rates.

Low MFN tariffs5.0% or less

Medium MFN tariffs5.1–10.0%

High MFN tariffsMore than 10.1% or more


Number: 1

Income: $3 453

Countries: 9

Income: $1 230

Countries: 32


Countries: 7

Income: $9 185

Countries: 16

Income: $11 170

Countries: 6


Countries: 7

Income: $5 979

Countries: 13

Income: $2 385

Countries: 8


Countries: 15

Income: $6 731

Countries: 38

Income: $2 727

Countries: 46

III. INSTRUMENTS OF TRADE POLICY 25

(MFN) tariffs imposed by non-oil developing countries

on non-agricultural and agricultural products. As a

general rule, the data confirm an inverse relationship

between duty rate and income: Tariff barriers tend

to be higher in the poorer countries and lower in the

richer countries. Incomes are more than six times

greater in the countries where average tariffs on non-

agricultural tariffs are 5 per cent or less, as compared

to those where these tariffs are greater than 10; the

income multiple is larger still (7.7 times) when it comes

to tariffs on agricultural products.

These observations speak to important issues in the

debate over trade and development. The data tend

to follow the sequence whereby countries appear to

calibrate their market-opening initiatives to the pace

of their development. A proponent of free trade might

go on to argue a more direct causation: The countries

that open their markets the most are the ones that

reap the greatest benefits. That may be too great a

leap to make on the basis of a small amount of data,

however, especially when considering the spottiness

of the apparent pattern. The correlation between

wealth and openness is not supported, for example,

by the observations for developing countries in the

Americas. Incomes in that region show a positive

relationship with tariffs; this is especially true for non-

agricultural tariffs, where incomes in the high-tariff

countries are more than twice as high as they are in the

low-tariff countries. A few outliers account for some,

but certainly not all, of the difference. While GDP per

capita in the Bahamas is an impressive $22,897, the

average applied MFN tariffs in that country are 37.3

per cent for non-agricultural goods and 21.8 per cent

Table 11. Relationship between agricultural tariffs and income, 2014 (Average GDP per capita for non-oil developing countries)

Source: Average tariffs from WTO (2015); GDP per capita calculated from World Bank data at http://data.worldbank.org/

indicator/NY.GDP.PCAP.CD.

Notes: Tariffs are simple averages for applied MFN rates. Data for some countries refer to 2013.

Low MFN tariffs5.0% or less

Medium MFN tariffs5.1–10.0%

High MFN tariffsMore than 10.1% or more


Number: 1

Income: $4 187

Countries: 5

Income: $969

Countries: 36


Countries: 1

Income: $7 570

Countries: 5

Income: $8 749

Countries: 24


Countries: 5

Income: $2 402

Countries: 5

Income: $4 775

Countries: 17


Countries: 7

Income: $4 720

Countries: 15

Income: $4 234

Countries: 77

for agricultural products. By contrast, in Haiti ($829

per capita income) these average tariffs were 4.2 per

cent and 8.2 per cent , respectively.

Beyond reviewing a country’s own tariff profile, and

considering whether changes should be made to

it, a TPF should examine in depth the tariff barriers

that the country faces in its exports to actual and

potential partners. To start with, what kind of access

does the country enjoy to these markets? Is that

access on a simple MFN basis, or is it preferential?

Are those preferences autonomous on the part of

the partner country (e.g. through a programme such

as the Generalized System of Preferences), or are

they reciprocal (i.e. in an RTA)?7 Are the preferences

comprehensive, or are important products and sectors

excluded?

[T]he constraints and problems that inhibit export growth

… arise in production, in moving goods and services

across the border, and in export markets. A trade

policy framework must therefore identify and tackle the

constraints and problems faced by exporters at every

stage of this process of production and distribution of

goods and services for export.


TPFs that review the market access enjoyed by

developing countries, and especially the least

developed countries, typically find that tariff barriers

in the markets of developed partners are low or even

non-existent for many products. This has long been

true for raw materials, and today many manufactured

exports of developing countries are eligible for reduced-


duty or duty-free entry through either preferential

programmes or RTAs. There may nonetheless remain

some important exceptions to that general rule, either

for products that the country now exports or that it

might export in the future. These exceptions need to

be identified, quantified and analysed. A TPF should

also review the costs and benefits of seeking to reduce

or eliminate these remaining tariff barriers, whether

through the negotiation of new trade agreements or

through improvements to a partner’s preferential trade

programmes. Those improvements might also entail

reforms to a programme’s rules of origin, which are

often written in ways that are difficult for developing

countries to meet.

A TPF will sometimes find that it is in a country’s

interest to undertake its own tariff reforms on an

autonomous basis. That can be based on assessment

of whether the existing tariffs act as an impediment to

the establishment or operation of national industries,

typically by raising the costs of the capital equipment

or inputs that they need to import. The TPF for

Zambia, for example, proposed that applied MFN

tariffs on most goods should be maintained at the

current rates (ranging from zero to 25 per cent ), but

that consideration should be given to binding tariffs on

capital goods at zero so as “to allow firms to invest in

new plants and equipment” (p.53).

If a TPF proposes that a country seek to reduce

or eliminate a tariff imposed by a partner country,

it should do so in the context of a larger plan. It is

generally not practical to ask that a specific partner

eliminate a tariff on a single product, unless there are

special mechanisms in place that provide for just such

a move.8 If the country concerned aims to negotiate

for the elimination of certain tariff barriers, it will

typically need to do so either in WTO negotiations or

in an RTA. If the TPF goes in that direction, it ought to

be comprehensive in identifying the country’s offensive

and defensive interests in a negotiation. Offensive

interests are those commitments that a country seeks

from its negotiating partners, while its defensive

interests are shown in the country’s reluctance to

make concessions in sensitive areas. The offensive

interests of a country will typically be concentrated

in those sectors for which it is more competitive than

its partner, but that partner’s barriers are relatively

high. Conversely, these may be the very same areas

in which the partner’s defensive interests are highest.

To find some arrangement that satisfies both sides,

negotiators must exercise the art of compromise.

Before these negotiators can even begin, however,

they must first know their own interests — as well as

those of their partner — in detail. That requires, as

a first step, that they be armed with the necessary

data on trade and the tariffs that each side imposes.

A TPF should not only conduct such a review for any

negotiations that it may contemplate, but also make

recommendations designed to ensure that the country

can perform similar calculations in any negotiations in

which it may be engaged in the future.9

2. Procedures and rules affecting the movement of goods

Tariffs can be thought of as the highest and most visible

part of an iceberg that may block entry into a harbour.

Whether those tariffs are relatively high or low, the mass

of procedures that lay beneath them could prove to be

even more obstructive. A TPF should devote just as

much attention to the other procedures and rules that

affect the movement of goods as it does to tariffs, and

should be especially attentive to those that the country

itself might employ. Unlike tariffs, which may at least

have the ancillary benefit of providing government

revenue, these other barriers will sometimes amount

to little more than a deadweight loss for the country

and its partners. A TPF will do well to identify ways in

which border procedures may be made more efficient

and affordable for both exports and imports.

The TPF for Algeria, for example, stresses that port

infrastructure has not evolved since independence

and is unsuitable for container traffic. This imposes

additional costs on the economy via congestion,

waiting times and demurrage. Similar problems

plague the air transport sector. Despite substantial

investment in airport infrastructure, there is a shortage

of space and equipment (e.g. dedicated scanners

for processing perishable fruits and vegetables). The

TPF recommended a new plan for the extension and

modernization of existing ports.

The data in table 12 underline the significance of

this problem for countries in all developing regions,

showing the amount of time and money it takes to

export or import goods. These numbers are based

on World Bank calculations that assess the actual

procedures required in each country, averaged out

here for regions. For example, border compliance for

exports is calculated as “time and cost for obtaining,

preparing and submitting documents during port or

border handling, customs clearance and inspection


procedures”. The data show that by comparison

to the Organization for Economic Cooperation and

Development (OECD) countries, the procedures in

the average sub-Saharan African country take 10.4

times as many hours for exports and 21.2 times as

long for imports. In the Middle East and North Africa,

the costs associated with compliance are especially

large. These costs are 4.1 times more expensive than

those of the OECD countries for exports, and 6.6

times greater for imports. The gap is smaller between

the OECD countries and the developing countries of

Europe and Central Asia, but even there it remains

considerably more time consuming and expensive to

comply with the trade procedures in the lower-income

than in the high-income countries.

A TPF should start by reviewing the reported World

Bank data and examine the various requirements

that the country currently imposes on exporters and

importers. Most countries could benefit from reforms

in the amount of paperwork that is required to be

filed, and in the ways that the data are submitted and

processed. A TPF should also address the question

of whether the country ought to sign on to the WTO

Trade Facilitation Agreement, what reforms might be

needed to bring the country into compliance with this

agreement, and what technical assistance might be

sought to achieve these reforms.

Countries may also consider other means of facilitating

the movement of goods. These include special tariff

treatment for certain products, free zones, duty

drawback programmes and exemptions.

Table 12. Average time and costs involved in trading across borders

Source: World Bank Doing Business data at http://www.doingbusiness.org/data/exploretopics/trading-across-borders.

Note: Times are expressed in hours; costs, in dollars.

OECD high income

East Asia and the Pacific

Europe and Central Asia

Latin America and the

Caribbean

Middle East and North

Africa

South Asia Sub-Saharan Africa

Time to export:

Border compliance 15.2 51.4 27.6 86.1 65.4 60.9 108.2

Documentary compliance 4.5 74.7 30.7 68.0 78.8 79.8 96.6

Total compliance hours 19.7 126.1 58.3 154.1 144.2 140.7 204.8

Cost to export:



Total compliance costs 195.5 562.6 363.0 626.9 796.2 559.5 788.0

Time to import:


Documentary compliance 3.9 69.7 27.4 93.3 104.7 108.1 123

Total compliance hours 13.3 129.0 50.6 200.1 224.4 222 282.6

Cost to import:



Total compliance costs 147.6 568.9 310.5 793.2 978.9 1002.1 994.3

Develop quality, reliable, sustainable and resilient

infrastructure, including regional and transborder

infrastructure, to support economic development

and human well-being, with a focus on affordable and

equitable access for all.

One of the eight targets under Sustainable Development

Goal 9:INDUSTRY, INNOVATIONAND INFRASTRUCTUREBuild resilient infrastructure, promote



3. Subsidies and other incentives

One of the most delicate questions in any country’s

trade and development strategies concerns the role

of the State in providing aid to local producers. This

issue goes to the heart of the question of whether

development will be state-directed or market-driven.

And while there is on the one hand a strong argument

to be made for Government to assist private industry

in overcoming structural impediments, especially in

the case of infant industries, there are also legitimate

concerns to be raised over the capacity of the

Government to pick winners and losers. A State that

does not aid industry at all may be thought derelict

in its duties, but one that intervenes too vigorously

might run the risks of jamming market signals or

degenerating into corruption.

Even countries that generally favour a laissez faire

approach to economic development may find room

for incentive programmes. Consider the cases of

Panama and the Dominican Republic, both of which

have strategies that generally put the market before

the State in the pursuit of trade and development.

Government support programmes “are highly

important to promote competitiveness, exports and

attract investment”, according to the TPF for Panama,

and “assistance is also relevant for the establishment

of industries and manufactures outside of the

interoceanic area”. That report urged that instruments

be used “to strengthen local industrial areas and to

economically revitalize the west and east zones of the

country” in order to “generate a demand for locally

produced supplies with quality specifications and

may promote technology transfer”. In Panama, the

investment promotion agency Proinvex was created

in 2009 to manage a one-stop-shop-integrated

information system that allows investors to easily

identify all the instruments available to support foreign

direct investment. The TPF argues that this institution

requires more human and financial resources, and that

trade and investment promotion would benefit from a

clear plan that defines operational priorities in line with

the long-term development goals of the country. The

report further argued that the Authority for Consumer

Protection and Competition should receive increased

attention and a more prominent role.

Two notes of caution nonetheless arise whenever

considering programmes that extend incentives to

producers. One concerns the budgetary impact

that incentives might have. Budgets are tight in

all countries, especially poorer countries, and any

programmes that involve either the appropriation

of funds or the forgiveness of taxes (internal or

external) need to be approached with caution. Export

subsidies in particular raise concerns over equity and

effectiveness. While it might at first appear justified

for the Government in a developing country to

offer such subsidies as a means of overcoming the

structural disadvantages under which their producers

must operate, these payments might alternatively

be considered a mechanism by which funds are

transferred from the taxpayers in developing countries

to the consumers in other (usually richer) countries.

That is a transaction that may be difficult to justify from

the standpoint of distributive justice.

Promote the rule of law at the national and international

levels and ensure equal access to justice for all.

Substantially reduce corruption and bribery in all their

forms.

Develop effective, accountable and transparent

institutions at all levels.

Ensure responsive, inclusive, participatory and

representative decision-making at all levels.

Four of the 12 targets under Sustainable Development

Goal 16:

Promote just, peaceful and inclusive societies

PEACE, JUSTICEAND STRONGINSTITUTIONS

Concerns also arise over the potential abuse of such

programmes, especially those that involve a high

degree of governmental discretion in their allocation.

The institutions that administer these funds need

to operate objectively, and not play favourites, but

this can be problematic if the country in question

encounters problems in the rule of law. Here it may

be appropriate to repeat the observation that “the

State that governs least governs best,” insofar as

corruption begins with opportunity. Those countries

in which the State intervenes heavily in the economy,

whether through taxes and tariffs or through subsidies

and other incentives, are also the ones in which

unscrupulous persons may perceive the greatest

advantages in exercising undue influence on public

officials. The aim might variously be to avoid tariffs or

taxes, or evade some regulation, or win a procurement

contract, or obtain access to a subsidy, with favours

in these areas being rewarded through some form of

bribery to the administering officials. Corruption and

arbitrary government are self-inflicted wounds that


prevent countries from achieving their full potential. On

average, incomes in those countries that are perceived

to be the least corrupt are 16 times higher than they

are in the most corrupt countries.10

These observations point to the need to put adequate

safeguards in place so as to ensure that state

intervention in the economy is not too expensive,

stifling or subject to abuse. As discussed in the TPF

for Jamaica, it is important not to offer too wide

and overlapping an array of incentives. In addition

to free zones, Jamaica provides incentives that

variously offer waivers or moratoriums on taxes and

tariffs, accelerated depreciation and other forms

of preferential tax treatment. The country also has

special incentives in place for the tourism, information

and communications technology, and film sectors.

The TPF proposed that these programmes be

rationalized. And while the TPF for Panama observed

that logistic and financial support might be provided

in order to facilitate exporters’ participation in trade

fairs and similar initiatives, it argued that this should

be done only to the extent that it does not introduce

market distortions. The TPF for Algeria stressed the

importance of fighting corruption and argued that

better use of computer controls could help to identify

any customs agents that might be abusing their

authority.

4. Antidumping and other trade-remedy laws

Trade-remedy laws offer another means of regulating

trade at the border. The most significant of these is the

antidumping statute, a mechanism by which countries

may impose additional duties on imports that may

be found to be sold at less than fair value. A related

instrument is the countervailing duty (CVD), used to

impose penalty tariffs on products that are found to

benefit from subsidies. While the number of countries

that employ antidumping laws is on the rise, the CVD

law is less frequently invoked. Countries are even

less inclined to impose restrictions under safeguards,

which are intended to deal with imports that are

fairly traded but still considered to be injurious. The

safeguard laws were often invoked in the concluding

decades of the twentieth century, especially by

developed countries, but the mechanism has only

rarely been used since the conclusion of the Uruguay

Round. The reforms agreed to in those negotiations

have made it extraordinarily difficult for any country to

win any challenges to safeguard measures that are

brought to the WTO’s Dispute Settlement Mechanism.

The antidumping law had once been seen primarily

as a means by which developed countries restricted

imports from developing countries, but that has

changed. WTO members reported imposing 3,058

antidumping orders from 1995 through 2014. The

European Union and the United States collectively

accounted for 643 orders, or 21.0 per cent of the

total, but the two largest users of antidumping laws

among the developing countries — Argentina and

India — had 762 orders of their own (i.e. 24.9 per cent

of the total).11 There were altogether 48 developing

countries subject to antidumping orders during this

period, but that includes 9 countries that were subject

to just 2 or 3 orders each, and 14 that faced just one

order. China was the target of the greatest number

— the 759 antidumping orders against that country

constituted 24.8 per cent of the total — while other

large, Asian economies attracted many of the others.

Nearly half of all orders (1,497) were imposed on

China, India, Indonesia, the Republic of Korea, Taiwan

Province of China and Thailand.

The data in tables 13 and 14 show the relative frequency

with which different developing countries have either

been senders or receivers under the antidumping law.

The two tables confirm a general relationship between

the size of a developing country and its propensity

to be on either side of these transactions. China and

India, for example, top the lists in both respects. There

are only a few exceptions to this general rule, including

two countries that imposed no orders but were

subject to at least one (i.e. Israel and Zimbabwe), and

four countries that imposed orders on others but were

not subject to any (i.e. Costa Rica, Jamaica, Morocco

and Nicaragua). The data show that 31 developing

countries have imposed antidumping orders since

1995 and that another 24 have taken steps towards

doing so. That leaves nearly 100 developing countries

that neither conduct investigations nor impose orders.

As a result of its SACU membership, Botswana must

apply trade defences adopted by South Africa’s

International Trade Administration Commission (ITAC)

on behalf of SACU, and Botswana in particular. In 2013

Botswana issued the Botswana Trade Commission Act,

which aims to create an organism responsible for trade

remedies, the Botswana Trade Commission … [that] is

still in the process of being established.

Trade Policy Framework: Botswana (2016)


Table 13. Antidumping orders imposed on developing countries, 1995–2014

Source: Calculated from WTO data posted at https://www.wto.org/english/tratop_e/adp_e/adp_e.htm.

Africa and the Middle East Americas Asia and the Pacific

Subject to 100+ orders

— — China, India, Indonesia, Republic

of Korea, Taiwan Province of

China, Thailand

Subject to 11–100 orders

Saudi Arabia, South Africa,

United Arab Emirates

Argentina, Brazil, Chile, Mexico,

Venezuela (Bolivarian Republic

of)

Hong Kong (China), Iran

(Islamic Republic of), Malaysia,

Singapore, Turkey, Viet Nam


Algeria, Egypt, Israel, Jordan,

Kenya, Kuwait, Libya, Malawi,

Nigeria, Oman, Qatar,

Zimbabwe

Colombia, Cuba, Dominican

Republic, Ecuador, Guatemala,

Honduras, Paraguay, Peru,

Trinidad and Tobago, Uruguay

Bangladesh, Macao (China),

Nepal, Pakistan, Philippines,

Sri Lanka

Table 14. Antidumping activity by developing countries, 1995–2014

Source: Calculated from WTO data posted at http://www.wto.org/english/tratop_e/adp_e/AD_InitiationsByExpCty.xls and

http://www.wto.org/english/tratop_e/adp_e/AD_MeasuresByRepMem.xls.


100+ orders imposed

South Africa Argentina, Brazil China, India, Turkey

11–100 orders imposed

Egypt, Israel Colombia, Mexico, Peru,

Venezuela (Bolivarian Republic

of)

Indonesia, Republic of Korea,

Malaysia, Pakistan, Philippines,

Taiwan Province of China,

Thailand


Morocco Chile, Costa Rica, Dominican

Republic, Guatemala, Jamaica,

Nicaragua, Paraguay, Trinidad

and Tobago, Uruguay

Singapore, Viet Nam

10+ investigations but no orders

Saudi Arabia, United Arab

Emirates

— Hong Kong (China), Iran (Islamic

Republic of)

1–10 investigations but no orders

Algeria, Bahrain, Jordan,

Kenya, Kuwait, Libya, Malawi,

Mozambique, Nigeria, Oman,

Qatar

Cuba, Ecuador, El Salvador,

Honduras

Bangladesh, Democratic

People’s Republic of Korea,

Macao (China), Nepal, Sri Lanka

The options are limited for developing countries that

are targeted by antidumping laws. Legal defence

against these cases can be quite costly, both in the

country where the case is originally brought and (if a

challenge is made) in the WTO, and those expenses

are usually borne by the exporting firm. Sometimes an

exporter will be so intimidated by the costs that it will

opt to leave the market altogether. Negotiators from

developing countries have sought reforms in these

laws, but have so far achieved little progress in that

direction. Simply stated, the antidumping laws of the

developed countries are one of the most damaging

exceptions to the general rule by which those countries

have reduced their barriers to trade to a fraction of

what they once were.

Should those developing countries without

antidumping laws of their own emulate the practices

of larger countries? While legitimate concerns may

arise over potentially unfair import competition, it

does not necessarily follow that the antidumping law

is the best response. It might require a half dozen

or more highly trained professionals (as well as a

substantial budget for travel and other expenses) to

carry out the responsibilities of a national antidumping

law. This is not something that can be done “on the


cheap,” as any findings of an antidumping authority

can be challenged by a country’s trading partners in

the WTO. It can be quite expensive for a country to

ensure not only that its antidumping investigations are

properly conducted, but that the results are effectively

defended from any legal challenges that might follow.

Whatever time and manpower a country might devote

to the establishment and operation of an antidumping

unit might be better used in some other function of

the trade ministry. One exception to this general rule

comes in the case of regional organizations that

may take on this function on behalf of their member

States. Botswana, for example, is developing its own

capabilities in conjunction with the Southern African

Customs Union (SACU).

Similar points may be made with respect to CVD

law. As can be seen from the data in tables 15 and

16, compared to the antidumping law, this option is

much less frequently invoked by or against developing

countries. Only 22 developing countries were subject

to CVD orders during 1995–2014, and India was the

only one facing more than 10 orders. Ten developing

countries imposed CVD orders of their own, while four

others conducted investigations without imposing

orders.

B. MEASURES AFFECTING INVESTMENT AND TRADE IN SERVICES

A TPF needs to cover the full array of issues affecting

a country’s prospects for trade and development. In

addition to border measures affecting goods, these

may include a very wide range of matters related

to investment, trade in services, and any other law,

regulation, or policy that might constrain or promote

the country’s ability to compete in the global market.

The specific measures at issue may differ greatly from

one country to another, depending on the types of

industries in which it is engaged, its principal partners

in international trade and investment, and the nature

of its domestic legal and regulatory regime.

Perhaps the most problematic topic for interministerial

consultations is trade in services, a subject

that naturally implies the possibility that trade

negotiators may step onto the turf of the ministries

of transportation, finance, justice, and education,

among others. The issue is partly one of awareness.

From actors to accountants, and from bus drivers to

bankers, service providers may never have thought of

themselves as actual or potential exporters. They may

Table 15. Countervailing duty orders imposed on developing countries, 1995–2014

Source: Calculated from WTO data posted at https://www.wto.org/english/tratop_e/scm_e/CV_MeasuresByExpCty.pdf.



— — India


Côte d’Ivoire, Israel, South

Africa, United Arab Emirates

Argentina, Brazil, Colombia,

Mexico, Venezuela (Bolivarian

Republic of)

China, Indonesia, Iran (Islamic

Republic of), Republic of Korea,

Malaysia, Pakistan, Philippines,

Sri Lanka, Taiwan Province of

China, Thailand, Turkey, Viet Nam

Table 16. Countervailing duty activity initiated by developing countries, 1995–2014

Source: Calculated from WTO data posted at https://www.wto.org/english/tratop_e/scm_e/CV_MeasuresByRepMem.pdf

and https://www.wto.org/english/tratop_e/scm_e/CV_InitiationsByRepMem.pdf.


11+ orders im-posed

— Mexico —


South Africa Argentina, Brazil, Chile, Costa

Rica, Peru, Venezuela (Bolivarian

Republic of)

China, Turkey

Investigations but no orders

Egypt, Israel — India, Pakistan


be quite surprised to hear that their activities come

within the ambit of trade negotiations. Matters are

more complicated if the ministries that regulate these

sectors object to a process by which the trade ministry

may negotiate commitments affecting the laws and

regulations that they implement. Many officials in trade

ministries have had similar, negative experiences in

the run-up to new negotiations, encountering strong

resistance from other government agencies when

they request guidance on what the country should

seek in a negotiation, and be prepared to give up,

when bargaining over the commitments made on

trade in services. Both for services providers and

the corresponding line ministries, trade negotiators

often find that it is necessary to conduct awareness-

raising exercises such as national seminars on trade

in services in order to educate the public and private

sectors and to establish working relationships with

regulators and stakeholders.

The analysis of tariff and trade data for goods is rela-

tively simple by comparison with the task of assessing

the impact of non-tariff measures affecting goods, ser-

vices, investment and intellectual property. Information

on these measures can be much more difficult to ob-

tain, and their consequences can be harder to quanti-

fy, both for one’s own country and one’s trading part-

ners. Services pose especially difficult challenges. The

general scheme and language of the General Agree-

ment on Trade in Services (GATS) mimic the princi-

ples and structure of the goods-oriented GATT, but

on closer inspection, this agreement and its subject

matter are conceptually far more complex. The way in

which commitments are negotiated and expressed is

entirely different, and analysts cannot easily gauge the

actual effect of these commitments. A country’s GATS

commitments do not readily indicate whether they are

truly liberalizing, or are just bound at the applied rate,

or even above that rate (i.e. permit a country to be-

come more restrictive than it presently is). Matters are

further complicated by the fact that there is no uni-

versally accepted nomenclature for services, and even

the most economically advanced countries’ statistics

on trade in services are at best incomplete. These are

all obstacles that need to be overcome, to the max-

imum extent possible, when assessing a country’s

actual and potential engagement in trade in services.

Countries are affected in varying ways by trade in

services. They may have interests as both exporters

and importers, depending on the sector and the

mode in which the service is being traded, and the

services in question may affect a wide range of related

sectors. Even goods-producing sectors will rely on

access to quality services at affordable prices, and

restrictions on foreign providers of those services

may impose costs on other domestic producers. That

is why the TPF for Zambia recommended that the

country pursue unilateral liberalization of its services

sector, adopting a “4 plus 5 strategy” in the WTO.

“This strategy,” it asserted, “will help the country

focus on the sectors which are important for reducing

costs and are currently impeding growth: financial

services, telecommunications, transport and energy”

(p.52). The TPF also called for liberalization of five key

services sectors at the regional level, namely business

and professional services, communications services,

financial services, transport services and labour

mobility (i.e. the entry of business persons).

TPFs often stress the importance of services

for national development. The report on Angola

offers a fine example of a TPF that deals in depth

with services. It recommended that a national

strategy plan be developed for the services sector,

looking at how infrastructural services can be

built through the channelling of public funding,

public–private partnerships, regional cooperation

and producer services. The TPF also had more

specific recommendations with respect to the

financial, energy, construction, tourism, transport

and telecommunications sectors. Similarly, services

figured prominently in the TPF for Zambia. It

advocated a 4 plus 5 strategy that contemplates

unilateral liberalization by way of WTO commitments

on financial services, telecommunications, transport

and energy services sectors, as well as regional

liberalization of business and professional services,

communication services, financial services, transport

services and labour mobility in respect of the entry

of business persons. The report on the Dominican

Republic attributes significant improvement in

infrastructure and telecommunications, financial, port

and airport concession services to the incentives and

special legislation aimed at promoting development

through private participation (domestic or foreign).

Small, open economies are highly services oriented,

as the report of Jamaica noted, but are also significant

net importers of those process services that are

integral to value chain participation. That TPF argued

that the country will need to intensify its efforts to

attract external investment and strengthen its services

capabilities outside of the very successful tourism and

travel sector.


1. Financial services

The financial services sector may arguably be the most

significant of all business-related services, insofar as it

affects virtually all other sectors — both goods and

services. Financial services are critical to the financing

of new investments and individual transactions, and

access to credit is a critical determinant of whether

new ventures are profitable or even feasible. There

are some developing countries that are leaders in

this sector, such as Panama and Lebanon, but most

others rely at least partly on the presence of foreign

providers in this sector.

Regulation in the financial services sector is therefore

a matter not merely of sectoral but of horizontal

importance for developing countries, and one that

merits close attention in a TPF. The report on Angola,

for example, recommended with respect to financial

services that the country adopt reforms to enhance

the use of banking by the national population. The

recommendation urged improvements in regulatory

and institutional support for the national Law on

Financial Institutions, and called on the Government

to build a hub for credit risk information, increase the

quantity and quality of human resources specialized in

banking and develop a law on money laundering.

2. Transportation and tourism

Like financial services, the transportation and tourism

sectors have widespread effects on the economy

as a whole. Efficient and affordable transportation

is a critical element in determining the international

competitiveness of a country’s goods, just as tourism

is linked with a wide cluster of goods- and services-

producing sectors.

Panama offers a good example of a country that has

benefited from the efficiency of its service providers in

these sectors, and hopes to move from strength to

strength. Services account for about 90 per cent of

the total Panamanian exports, and are concentrated

around canal-cluster activities, tourism, banking,

telecommunications and other related activities. The

persistent services trade surplus partly offsets that

country’s equally persistent deficit in merchandise

trade. Panama had decided to double down on its

commitment to trade in services, with the National

Logistics Plan (PNLog) identifying the interoceanic

area as an area of vital importance to logistics

development. Nor are these aspirations unique to

relatively high-income countries such as Panama.

Namibia is positioning itself as a services hub in

the SADC region, especially in transport services.

Liberalization of these transport and tourism sectors,

according to that country’s TPF, enables Namibia to

forge ahead with its trade and industrialization plans

with minimal policy let or hindrance in the region.

Countries may nonetheless encounter difficulties in

exploiting their potential for tourism. Officials can

sometimes fall into the trap of believing that with respect

to this sector “if you build it, they will come”. The TPF

for Algeria took a more realistic view, stressing that the

development of touristic infrastructure is necessary

but not sufficient. Similar logic may explain why this

is one of the few services sectors in which most

developing countries have made GATS commitments.

“If you commit it”, the hope may have been, “they will

invest”. An open trade and investment regime may

be a necessary element for the attraction of foreign

investment in tourism facilities, but it is not sufficient.

The other elements include such diverse elements as

the presence of attractions that range from museums

and sports stadiums to beaches and ecotourist sites,

efficient airports and cruise ship ports, frequent and

affordable connections with major population centres

and a reputation for preserving the physical safety of

visitors from crime, political unrest, tropical diseases

and gastrointestinal disorders. These are all factors

that should be given just as much consideration as

trade agreements and promotional campaigns when

assessing how a country might tap more effectively into

this potentially lucrative source of foreign exchange.

3. Movement of persons

Developing countries’ prospects for each of the

services sectors discussed above depend largely

upon their own policy reforms and the foreign

investment that they manage to attract. The situation

is very different for what in WTO parlance is called

Mode 4, meaning the movement of natural persons

for the purpose of supplying services. This is an

area where many developing countries have export

interests, but their ability to take advantage of their

[T]elecommunications, transport, energy and financial

services … are a driving force in the economy. Their

efficient organization will reduce unit costs and help

lower the high cost of production in Zambia. They will

also generate both increased merchandise and services

exports.



advantages is heavily dependent upon the willingness

of their partners — especially, but not exclusively, the

developed countries — to relax the existing restrictions.

If markets were fully open, developing countries would

be well positioned to supply a wide range of services

via Mode 4, from construction to medical services, but

the immigration laws and regulatory schemes of the

developed countries greatly inhibit this movement.

This is an issue explored in some TPFs. The Angola

report observes that developing countries, and

especially the least developed countries (LDCs), have

indicated that Mode 4 represents one of the most

important means of supplying services internationally.

The report notes that these countries have requested

that other WTO Members, to the extent possible and

consistent with GATS article XIX, consider undertaking

commitments to provide access in Mode 4, taking into

account all categories of natural persons identified by

LDCs in their group requests related to this mode of

supply. In the absence of such commitments, whether

they are provided in WTO or in RTAs, the export

capacity of developing countries may continue to be

inhibited.


Trade negotiations and trade promotion

IV

While trade negotiations are by no means the sole task

of the trade ministry, they are typically its most visible

function. Performing that function is more challenging

now that the number of negotiating platforms has

increased, the demands made on developing countries

have deepened and the number of issues on the table

has proliferated. A trade ministry may need to handle

multiple negotiations at once. It must also follow up on

the existing trade agreements, ensuring not only that

they are properly implemented at home and abroad,

but also pushing the country to take full advantage of

the opportunities that these agreements create.

Negotiating trade agreements is only a first step towards

taking full advantage of the potential opportunities

in the external sector. It is equally important that a

trade ministry follow through by working with national

producers and prospective investors to identify and

exploit market opportunities.

The nature of the global debate over trade and

development has undergone major shifts in recent

decades. Simple formulas such as the demand

for special and differential treatment for developing

countries, or the insistence of “trade, not aid” as the

royal road to development, have given way to a more

variegated range of approaches that countries take

towards the liberalization of their own markets and

the quest for preferential access to foreign markets.

While some developing countries base their strategies

on a major role for the State and hope to secure open

access to developed country markets on a one-way

basis, others give greater weight to the market and are

willing to secure that access through the negotiation of

two-way agreements. One of the key questions to be

addressed in any TPF is which of these approaches

— or some compromise between them — is the most

appropriate means of mainstreaming trade into the

country’s development strategy.

A TPF should examine in depth a country’s participation

in existing trade agreements, both multilateral and

regional, as well as the options for new negotiations.

The descriptions and prescriptions should present an

overall vision of the country’s main objectives in its

trade agreements and consider how the actual and

potential agreements contribute to those aims.

A. MARKET ACCESS: PREFERENTIAL OR RECIPROCAL?

The first and most fundamental question that a

developing country faces in devising its trade strategy

concerns the terms on which it is prepared to secure

improved access to other countries’ markets. Does

it seek to obtain preferential access in one direction,

in which developed countries (and some developing

countries, as well) grant open access to their markets

without demanding concessions in return, or is it

prepared to negotiate agreements in which it also

opens its own market? This question is especially

apt for middle-income countries, insofar as least

developed countries are generally not expected to

negotiate reciprocal agreements with their developed

partners. Even for LDCs, however, the negotiation of

reciprocal arrangements with their neighbours, either

in the form of free trade agreements or customs

unions, remains an option.

Whether or not they enter into RTAs, developing

countries may place differing degrees of emphasis on

discrimination as an element in their trade strategies.

There are two issues here.

First, how important is it to obtain preferential access to

major markets, and at what price? That discrimination

includes not only the terms of the preferential access

that they hope to obtain to the markets of developed

countries, but also the preferences that they might give

in return. The principal options are the non-reciprocal

(one-way) preferences that developing countries enjoy

via programmes such as the Generalized System of

Preferences, or the reciprocal (two-way) preferences

that they secure through the negotiation of RTAs.

The second issue concerns the value that a country

will place on retaining any preferential access that

it might enjoy. Will that country view initiatives to

negotiate multilateral trade liberalization as another

opportunity to improve its access to foreign markets,

or will it instead see a threat to the margins of

preference that it already enjoys under preferential

programmes and agreements? The answer to that

question has important systemic implications, as one

of the most intractable problems in the Doha Round

stems from the widespread concern on the part of

poorer developing countries that any reductions in

MFN tariffs achieved in the negotiations could, on

balance, do them more harm than good.


Table 17. Principal themes in developing–developed country trade relationships

Africa and the Middle East Americas

Non-reciprocal 1950s–1960s: Apart from post-colonial

preferences (especially with the United Kingdom

and France), developing countries enjoyed

only MFN access to rich markets. Access was

non-reciprocal insofar as developing countries

were mostly outside GATT, unbound, and often

restrictive.

1970s: Starting with the GSP and followed by

regional preferences, developing countries acquire

preferential access to industrialized markets. Trade

policies generally remain restrictive and unbound,

with countries either staying outside GATT or

opting not to adopt its agreements.

Reciprocal 1980s: While still enjoying preferential access

under the GSP and other programmes, more

developing countries reciprocate by adhering to

the Washington Consensus, adopting more open

trade policies, acceding to GATT, and participating

actively in the Uruguay Round.

1990s: Many developing countries opt to negotiate

RTAs with industrialized countries, thus replacing

the one-way concessions of the GSP and other

preferential programmes with reciprocal, bound

preferences.

Promote a universal, rules-based, open, non-

discriminatory and equitable multilateral trading system

under the World Trade Organization, including through the

conclusion of negotiations under its Doha Development

Agenda.

Significantly increase the exports of developing countries,

in particular with a view to doubling the least developed

countries’ share of global exports by 2020.

Realize timely implementation of duty-free and quota-free

market access on a lasting basis for all least developed

countries, consistent with World Trade Organization

decisions, including by ensuring that preferential rules

of origin applicable to imports from least developed

countries are transparent and simple, and contribute to

facilitating market access.

Three of the 19 targets under Sustainable Development

Goal 17:

Revitalize the Global Partnership for Sustainable Development


The matrix in table 17 offers a simplified summary

of the principal directions that have been taken in

the trade relationships between developed and

developing countries in the years since the founding of

the multilateral trading system. In the first few decades

of that system, which coincided with the period in

which many African, Asian, and Caribbean countries

won their independence from European countries,

most developing countries remained either outside

the GATT system or participated only nominally in

multilateral negotiations, and any preferences that

they received came solely from their former mother

countries. In subsequent decades, the relationship

evolved along with the introduction of one-way

preferential programmes in the 1970s, the adoption

of more pro-trade policies in the 1980s and the new

wave of North–South RTAs starting in the 1990s. Each

of those developments were general trends only, and

in every period there have been some countries that

deviated from the path that the majority took.

What distinguishes the present period from the past

is that it is no longer possible to identify a single

pattern that accounts for the majority of all developing

countries. While some countries have enthusiastically

pursued the initiatives that began in the 1990s,

negotiating numerous RTAs with one another and with

a diverse array of extraregional partners, others prefer

the earlier pattern of non-reciprocal preferences. In

neither case, however, can preferential access to the

markets of the developed countries be expected to

offer as much of a boost today at it did in past decades.

Margins of preference have been eroded as a result of

multilateral negotiations that reduced MFN tariffs and

have also been diluted by the developed countries’

proliferation of RTAs with many and varied partners.

The potential value of preferences has been further

undercut by Uruguay Round deals that phased out

the quotas on apparel and outlawed the imposition of

quotas under other forms such as voluntary restraint

agreements.

The Sustainable Development Goals, like the Millennium

Development Goals before them, call for the extension

of duty-free and quota-free market access to imports

from the least developed countries. Considerable

IV. TRADE NEGOTIATIONS AND TRADE PROMOTION 39

progress has been made towards that goal in many

import markets, primarily through programmes such

as Everything But Arms in the European Union and

the African Growth and Opportunity Act in the United

States. Significant exceptions nonetheless exist,

above all for textile and apparel products exported

from some regions (especially Asia) to some markets

(especially the United States).

B. MULTILATERAL, REGIONAL AND BILATERAL AGREEMENTS

This ever-larger number of bilateral, regional and

plurilateral trade negotiations places a commensurately

greater strain on the capacities of trade ministries in

developing countries. It is not unusual for a single

country today to be simultaneously engaged in

three or more trade talks, including at least one in

its own neighbourhood, one FTA negotiation with an

extracontinental partner and the multilateral bargaining

in WTO.

1. Multilateralism and regionalism

In principle, countries could differ greatly in the

emphases that they place on regional and multilateral

options in their trade strategies. In actual practice,

however, countries that are either sceptical or

enthusiastic about one form of commitment will tend

to be similarly inclined towards the other. A generation

ago there were still many developing countries

that were neither contracting parties to GATT nor

members of any RTAs, but the countries that meet

this description today constitute a decidedly small and

diminishing minority. And once countries negotiate

either type of agreement, they tend to negotiate both.

The examples shown in table 18 illustrate the fact

that there is no such thing as pure regionalism or

multilateralism in any country’s strategy. There are no

countries left that are either (a) actively and exclusively

engaged in RTAs (i.e. have many RTAs but are not

members of WTO) or (b) actively and exclusively

engaged in WTO (i.e. are high-activity WTO members

that have no RTAs). Nearly all countries are members

of WTO and have at least one RTA, and those with the

largest number of agreements typically treat multilateral

and regional negotiations as complementary rather

than mutually exclusive options. Those countries

that take a cautious approach to multilateral trade

agreements tend also to be somewhat slower in the

negotiation of RTAs, just as the most enthusiastic

participants in the multilateral negotiations are also

among the most prolific negotiators of RTAs.

Table 18. Exemplars of varying approaches to multilateralism and regionalism and level of activity in WTO

Sources: WTO activity index from Craig VanGrasstek, “The Trade Strategies of Developing Countries: A Framework for Analysis

and Preliminary Evidence” (2015). Data on RTAs are summarized from the WTO Regional Trade Agreements Information

System at http://rtais.wto.org/UI/PublicMaintainRTAHome.aspx.

Notes: Members: Countries with scores below 20 on the WTO activity index. This is an index comprised of data on the size

of its representation in Geneva, the number of documents associated with it in WTO, and its participation in disputes. Scores

range from a low of 1.8 to a high of 93.6.

High-activity members: Countries with scores above 20 on the WTO activity index.

Many RTAs: Countries that have RTAs in effect with at least two of the four largest economies (i.e. China, the European Union,

Japan and the United States), and also with other partners on two or more continents.

Few RTAs: Countries with at least one RTA, but only with partners on their own continent and none with the four largest

economies.

Neither the Global System of Trade Preferences nor partial scope agreements are counted here as RTAs.

a In the process of accession to WTO.

Non-members Members High-activity members

Many RTAs — El Salvador, Israel, Jordan,

Morocco, Nicaragua

Chile, Costa Rica, Republic of

Korea, Mexico, Singapore, Turkey

Few RTAs Iraq,a Iran (Islamic Republic

of),a Uzbekistana

Angola, Bolivia (Plurinational

State of), Georgia, Ghana, Haiti,

Kuwait

Argentina, Brazil, Ecuador

No RTAs Eritrea, Somalia, Syrian Arab

Republica

— —


Consider the case of Panama, which had remained

formally outside the multilateral trading system

until it decided in 1991 to accede to GATT. That

represented the beginning of an extensive process

of modernization in the legal framework for foreign

trade, with accession being complemented in the late

1990s by a policy of unilateral liberalization and then

the negotiation of multiple RTAs. These have been

treated not as mutually exclusive options, but as part

of an “all-of-the-above” strategy. One can see a similar

predilection for multiple negotiating forums on the part

of certain other countries in both the Americas (e.g.

Chile and Colombia) and Asia (e.g. the Republic of

Korea and Singapore).

This is not to say that every country that negotiates

one type of market-opening agreement will be

irresistibly drawn to all others. Namibia offers a good

example of a country that emphasizes the importance

of regional integration, placing greater emphasis on

closer relations with its regional partners than on

multilateral initiatives. Nor is this entirely a matter of

choice: Considering the difficulties not just of the Doha

Round but other multilateral negotiations in the WTO,

other countries may find that regionalism is their only

viable option for the foreseeable future.

Trade agreements are not the sole determinant of

the magnitude or direction of a country’s trade. This

point is underlined by the recent experience of the

Dominican Republic, which concluded a string of new

trade agreements in the first decade of this century.

Exports to the markets of the countries with which

it negotiated these agreements (including the United

States, the European Union, Central America, Panama

and CARICOM) represented more than 80 per cent

of total exports made between 2000 and 2010, they

accounted for a much smaller share of new exports in

this period. Whereas during 2003–2013, the average

annual growth rate for exports sent to these FTA

partner countries was only 2 per cent, it was full 10

times higher for Dominican exports to those countries

with which it had not signed such agreements (most

notably Haiti, but also China, India, the Bolivarian

Republic of Venezuela and Colombia).

2. Participation in WTO

One of the most important differences between the

current trading system and its GATT predecessor

is in the near universality of WTO membership. As

late as the 1980s, many of the largest developing

countries were still outside GATT. Following a wave of

accessions in the concluding years of the old regime,

and another set of accessions into the WTO, there

are few countries left that are not either members or

seeking to become members (box 4).

Box 4. Who is in WTO? And who is not?

The multilateral trading system started with just 23 GATT contracting parties in 1947, but grew to 128 by the time that

GATT gave way WTO in 1995. Many more countries acceded to WTO over the next two decades, with the total number

of members reaching 164 in 2016. WTO membership is so broad that it even encompasses some members that are not

recognized as separate States in the United Nations, including one regional super State (i.e. the European Union) and three

members that have special relations with the People’s Republic of China (i.e. Hong Kong (China), Macao (China) and Taiwan

Province of China).

Three kinds of countries that had been marginalized in the old GATT order now figure prominently among those that have

recently joined WTO or that are still in the process of accession. Eleven of the 36 countries that joined from 1995 through

2016 were formerly part of the Soviet Union, and another 11 either had been or remained non-market economies; five

of the countries still in the process of accession were likewise former Soviet or Yugoslav republics. Eight of the countries

that acceded, and five of those still acceding, are formally designated by the United Nations as least developed countries

(LDCs). Many net oil-exporting countries had stayed out of GATT, but they now account for three of those that acceded to

WTO and seven of those still acceding.

As of early 2017, 19 countries – either developing countries or former Soviet republics (except for Andorra, Bosnia and

Herzegovina, and Serbia) – were still in the process of accession. The largest of these is Ethiopia, with a population of

just under 100 million. Six other countries still in accession have populations of at least 10 million persons each, including

Algeria, the Islamic Republic of Iran, Iraq, the Sudan, the Syrian Arab Republic and Uzbekistan. The remaining countries

still negotiating to enter WTO are Azerbaijan, the Bahamas, Belarus, Bhutan, Comoros, Equatorial Guinea, Lebanon, Libya,

and Sao Tomé and Principe.

This leaves just 14 Members of the United Nations that have no relationship at all with WTO, being neither members nor

in the process of accession. The largest is the Democratic People’s Republic of Korea, with a population of 25.2 million.

The only other countries in this group that had populations in excess of one million persons were Somalia, South-Sudan,

Eritrea, Turkmenistan and Timor-Leste. The rest consist of very small States located either in Europe (i.e. Monaco and San

Marino) or the Pacific (i.e. Kiribati, the Marshall Islands, Micronesia, Nauru, Palau and Tuvalu).


Algeria offers an example of a country that has found

the process of WTO accession to be lengthy and

difficult, with its negotiations beginning even before

WTO came into being and now having lasted more than

a quarter of a century. The elongation of the process is

due in part to an ambivalence on the part of Algerian

authorities over the costs and benefits that accession

may have on the Algerian economy. Membership in

WTO ensures integration into global value chains,

according to the TPF, but does not in itself guarantee

diversification and upgrading of exports. The TPF

nevertheless concluded that staying out of WTO is not

an option, as that would mean keeping the country

exposed to the willingness of WTO member countries

to extend reciprocity autonomously. The principal

remaining question, as explored at length in that TPF,

is whether Algeria ought to use WTO accession as

a lever for diversification, or should instead diversify

its economy before exposing itself more openly to

multilateral trade rules.

Once a country has joined WTO, it must answer three

more questions: Will it establish a permanent mission

in Geneva, how will that mission be structured and

how large will its staff be? Some countries maintain

non-resident status and are represented only from the

national capital or from some other mission in Europe,

others establish a general-purpose mission dealing

with all Geneva institutions, while still others will found

(in addition to a general-purpose mission) a dedicat-

ed trade mission that is devoted solely to WTO affairs

and other trade-related organizations headquartered

in Geneva (especially UNCTAD and the World Intel-

lectual Property Organization). As for the size of WTO

missions, be they all-purpose of specific to trade, they

might range anywhere from one to 20 persons.

The choice among these alternatives requires that a

country balance its needs with its means. Maintaining

a permanent mission in Geneva is a costly undertaking,

as this is one of the world’s priciest places to live and

work. According to one survey, in 2016 it was the

twenty-first most expensive city for the rental of office

space. The average cost was $93 per square foot,

which was well below the most exorbitant locations

($290 in Hong Kong (China) and $262 in London)

but above the average price in New York ($86).23 The

disparities in the cost of living are even higher. One

survey shows Geneva as the third-most expensive

among 267 world cities; living in Geneva costs 1.3

times as much as living in Paris, 2.9 times more

than Bogota and 3.3 times more than Cairo.13 When

the cost of office space, salaries and adjustment

allowances for staff are combined, it is easy to see

how the price tag for even a small permanent mission

in Geneva can readily exceed $1 million per year.

Despite these costs, more countries opt to establish

dedicated trade missions in the WTO era than they had

in the GATT period. As of 1982 there were only four

GATT contracting parties with dedicated missions, or

just 5.3 per cent of all missions; these were run by

an average of 4.8 persons. By 1997 this had grown

to 20 dedicated WTO missions (19.2 per cent of the

total) with an average of 6.9 staffers, and by 2012,

the numbers rose to 39 such missions (28.7 per cent

) with 7.6 people each. The numbers of persons in

the average general-purpose mission also grew,

nearly doubling from an average of 3.0 persons in

1982 to 5.8 in 2012. These numbers have continued

to rise: As of 2014, the average developing country

with a dedicated mission had a staff of 7.8 persons,

compard with 6.6 persons for the average developing

country with a general-purpose mission.14

At the other end of the spectrum are the members that

have no mission at all in Geneva. Non-resident status

hampers a country’s ability to monitor and participate

fully in negotiations and related activities conducted

under the auspices of WTO, not to mention the other

Geneva-based institutions. Non-residency was once

a major problem, with many of the GATT contracting

parties or WTO members being represented only

intermittently from the capital city or from a mission

based in Bonn, Brussels, or London. Non-residency

peaked in 1997, when just over one fifth of members

were non-resident, but then declined to 16 members

(10.1 per cent ) in 2014.

What accounts for the decision of some countries

not to establish a Geneva mission? This choice is

strongly associated with economic size, such that in

2014 the average GDP of a non-resident country ($2.6

billion) was far below that of the average developing

country with either a general-purpose mission ($95.6

billion) or a dedicated trade mission ($679.9 billion).

Relative income is less important, with the average

gross domestic income per capita in a non-resident

country ($5,427) being just a little less than that of

the average country with a general-purpose mission

($5,737). Only 4 of the 16 non-resident members are

LDCs, due to the fact that these countries are eligible

for a Swiss subsidy that supports the establishment of

WTO missions. Today the most typical non-resident

member is a very small island State that is relatively


poor but still above the income level of an LDC. These

are generally countries that can afford to have only

a handful of diplomatic missions anywhere in the

world, and establishing one in Geneva might require

that they either close another elsewhere or find more

elasticity in a foreign ministry budget that may already

be stretched thin.15

3. Regional trade arrangements

RTA negotiations have become the most dynamic

part of the international trade system. They had once

been limited primarily to South–South agreements

(often taking the form of closed regionalism among

countries that took a dim view of trade liberalization)

or North–North agreements between neighbouring

countries (especially in Europe and North America),

but today these negotiations now take place in all

conceivable configurations. They include North–North

and South–South negotiations that reach across

oceans, plurilateral negotiations with heterogeneous

memberships and a great many North–South FTAs

that are sometimes called trade promotion agreements

(in the case of some FTAs of the United States with

developing countries) or economic partnership

agreements (for several FTAs that the European Union

and Japan have reached with their respective partners

in the developing world).

The kinds of agreement that countries have reached

within their regions also differ in qualitative terms.

Some countries have delegated considerable authority

over policymaking to the customs unions or common

markets in which they are members, others reach

regional agreements that leave greater autonomy to

the individual members, and still others either decline

to join any such arrangements or limit themselves to

associate memberships. The TPF for Namibia, for

example, stresses the extent to which policymaking

in SACU is dominated by the largest member of the

group. “In practice,” the report notes, “South Africa

has always taken decisions on the tariff structure,

and … largely continues to do so” (p.51). All of these

choices affect the ability of countries to achieve an

economy of scale in their representation, as well as

the range of options that individual trade ministries

have at their disposal.

At a time when the prospects for further multilateral

progress seem bleak, the negotiation of RTAs with

the major economic powers is perhaps the most

consequential option available to a developing

country. Some have few or no RTAs, others choose to

negotiate them only with their immediate neighbours

and still others negotiate many and varied agreements

with developed and developing countries. The data

reported in table 19 shows a close association between

extraregional RTAs and income. On average, incomes

are seven times higher in the countries that have RTAs

with three or four large partners than they are in the

countries with no such RTAs. It would, however, be far

too great a stretch to suggest that these RTAs — all

of which are relatively recent developments — are the

cause of that difference. It may be plausibly argued

that it is higher income that leads to RTAs, rather

than RTAs that lead to higher income, insofar as the

Table 19. Relationship between extraregional trade agreements and Income (Average GDP per capita for non-oil developing countries)

Sources: RTAs from WTO data at https://www.wto.org/english/tratop_e/region_e/rta_participation_map_e.htm; GDP per

capita based on World Bank data at http://data.worldbank.org/indicator/NY.GDP.PCAP.CD.

Notes: RTAs with large partners = number of regional trade arrangements in effect at the start of 2016 with the four largest

global economies (i.e. China, the European Union, Japan and the United States). Does not include partial scope agreements,

nor agreements that have not yet been concluded, approved, or implemented.

RTAs with no large partners RTAs with one or two large partners

RTAs with three of four large partners


Number: 40

Income: $4 460

Countries: 10

Income: —

Countries: 0


Countries: 6

Income: $8 527

Countries: 19

Income: $9 786

Countries: 4


Countries: 14

Income: $12 296

Countries: 17

Income: $40 055

Countries: 2


Countries: 60

Income: $9 036

Countries: 46

Income: $19 876

Countries: 6


countries with deeper pockets make more attractive

negotiating partners for the larger players. The data

nonetheless offer further evidence of a recurring

theme: Countries tend to adopt more open policies as

they move up the ladder of development.

The commitments that developing countries make in

RTAs with the major economies are typically wider and

deeper than those made in WTO. While the tariff cuts

proposed in the Doha Round are unlikely to require

many changes in the applied tariffs of most developing

countries, an RTA will usually oblige them to eliminate

most tariffs on imports from a partner country. Beyond

tariffs, RTAs are often WTO-plus in either one of two

senses: Some go beyond the commitments that

countries have made in topics that are subject to

WTO rules, and others provide for disciplines in areas

that are not covered in the existing WTO agreements.

Among the issues dealt with by RTAs with the

European Union are trade facilitation, trade remedies,

technical barriers to trade, sanitary and phytosanitary

measures, establishment, electronic commerce,

the regulatory framework, protection of biodiversity

and traditional knowledge, geographical indications,

agricultural safeguards and government procurement.

The issue coverage of the FTAs negotiated by the

United States is even wider, often including separate

chapters on the politically sensitive topics of labour

rights and environmental protection. These are all

topics with important implications for countries’

development strategies, and policymakers need to

weigh their interests and their options carefully before

deciding whether they are ready to make binding and

enforceable commitments on these matters.

North–South RTAs are, of course, not the only

option available to developing countries. South–

South agreements are also in vogue. One example

is the Pacific Alliance in Latin America, in which

Chile, Colombia, Mexico and Peru promote deeper

integration and invite the participation of more

parties. African countries are actively negotiating

both the Tripartite Free Trade Area (a proposed free

trade agreement between the Common Market for

Eastern and Southern Africa, the Southern African

Development Community, and the East African

Community), and the Continental Free Trade Area.

These South–South agreements have historically

faced two difficulties: National leaders often appear

more committed to such agreements in principle

than they are in detail, thus leading to elongated

negotiations and incomplete agreements, and even

when these agreements are concluded, they do not

always stimulate trade as much as the leadership

had hoped. These difficulties are recurring themes in

several of the TPFs. There has nonetheless been a

resurgence of interest in concluding such agreements,

and in making them work. They ought therefore to be

the focus of special attention in TPFs.

C. IMPLEMENTATION AND ENFORCEMENT OF TRADE AGREEMENTS

The negotiation of trade agreements represents

only the most visible part of a trade ministry’s

responsibilities. Agreements also need to be approved

and executed, the opportunities that they create must

be exploited through promotion, and — if one or more

countries believes that its partners are not fully living up

to the terms — these agreements must be enforced

by way of the dispute-settlement rules. The process

of approval is not dealt with here, as the constitutional

rules and political traditions of countries differ greatly

on this point. In some countries the approval of trade

agreements and other treaties is little more than a

formality, while in others the legislative branch may

show little deference to the executive.

The expanding scope of trade policy has complicated

the task of determining whether a partner’s laws, or

even one’s own, comply with all of the obligations of

the system. Back when tariff measures comprised the

great bulk of trade instruments, implementation and

compliance meant little more than ensuring that a

country’s applied tariffs did not exceed the bound rates,

and that the rules of non-discrimination (most favoured

nation treatment and national treatment) were not

violated. Today it is quite possible for the policymakers

in some other ministry to be entirely unaware that a

new law or regulation that they are about to enact

may clash with the obligations undertaken in one of

the more technically complex WTO agreements or

FTA chapters. The commitments that countries make

on such topics as services, subsidies and technical

barriers to trade may be especially susceptible to

unintentional violation through the adoption of new

laws and policies. Both to defend their rights and

to avoid being brought before the WTO Dispute

Settlement Body, countries need to keep abreast of

any such developments at home or abroad. They also

need to be prepared, if necessary, to defend their laws

before the Dispute Settlement Body.


The trade ministry should take the lead in ensuring that

the country is in compliance with its commitments. A

TPF can help in that regard by reviewing the existing

commitments and determining whether there is

adequate awareness of them in other line ministries.

Some countries have in place a formal process by

which proposed laws and regulations are reviewed

for their WTO consistency. A country also needs to

ensure that its partners in trade agreements — both

multilateral and regional — abide by their commitments.

As summarized in box 5, there are some centralized

sources of information that may be monitored.

If a country determines that one of its partners does

not comply with a commitment and considers that

this non-compliance prejudices its trade interests, it

does have recourse to action. This includes both soft

enforcement and hard enforcement.

1. Soft enforcement: Transparency, notifications and trade policy reviews

Concerns over non-compliant measures do not

always require that countries resort to the hard option

of a formal dispute. There are other, softer forms of

enforcement that are intended to promote compliance.

These include norms and rules of transparency, the

requirement that countries notify their measures, and

the conduct of trade policy reviews.

Transparency was a well-established principle in

the trading system long before the advent of WTO.

GATT article X provides that “[l]aws, regulations,

judicial decisions and administrative rulings of general

application” on matters related to trade “shall be

published promptly in such a manner as to enable

governments and traders to become acquainted with

Box 5. Sources of information on compliance and non-tariff barriers

Countries may take advantage of several programmes and databases in order to monitor the compliance of their partners

with the commitments made in trade agreements.

The trade policy reviews (TPRs) conducted by WTO, as discussed elsewhere in this manual, provide regular examinations of

members’ trade regimes and sometimes identify laws or policies that may not be consistent with a country’s commitments.

The TPR rules explicitly prohibit countries from citing these reports as the basis of a formal complaint in the WTO’s Dispute

Settlement Body, but any non-compliant measures that are identified in a TPR could certainly be verified through some

other source. Another WTO resource is the Integrated Trade Intelligence Portal (I-TIP), which gathers the data generated in

members’ notifications to the WTO and through other sources to provide practical information on a wide range of issues

affecting specific products and sectors.

UNCTAD offers the database on NTMs developed in collaboration with the African Development Bank, ITC and World

Bank, as well as ALADI, ERIA and the WTO secretariat. It provides a global information dataset on NTMs used by more

than 60 countries, representing more than 80 per cent of global trade. All the trade-related regulations, including the SPS

and TBT areas, are collected and classified in a systematic and coherent database. The NTMs database is disseminated

through WITS/World Bank, UNCTAD-iTIP and ITC dissemination systems.

The World Bank hosts two specialized databases that catalogue the restrictions that countries impose. The Temporary

Trade Barriers Database offers detailed information on more than 30 Governments’ use of antidumping duties, countervailing

duties and safeguards. The Services Trade Restrictions Database provides information on services measures for 103

countries in five sectors (telecommunications, finance, transportation, retail and professional services) and by modes of

delivery.

Several other databases on NTBs are available on a national or regional basis. Examples include the following:

• The Association of Southeast Asian Nations has a non-tariff measures database that allows users to download files on its members’ measures.

• The European Union maintains a market access database of other countries’ NTMs that can be either browsed or searched.

• The regional economic communities of Africa sponsor a mechanism for reporting, monitoring and eliminating non-tariff barriers that allows users to register complaints, seek to resolve them, and browse details and sum-mary statistics of the NTBs that others have reported to the system.

The global financial crisis of 2008–2009, which could have led to a new wave of protectionism, inspired the creation of the

Global Trade Alert (GTA). This is an independent project that catalogues all new measures adopted by any country that

affect trade, classifying them as protectionist, market opening, or neutral. The GTA measures can be browsed or searched

by several different criteria, and users may also register to receive alerts for any new measures affecting specific countries

or sectors.


them” . Other GATT articles supplemented this general

principle of transparency and publication by requiring

the notification of certain types of measures. The

scope of notifications expanded with the agreements

negotiated in later rounds, as well as with the horizontal

requirements set by the Understanding Regarding

Notification, Consultation, Dispute Settlement and

Surveillance. Today there are more than 200 provisions

in WTO agreements requiring notifications, most of

which are related to non-tariff measures.

A notification will typically consist of a short statement

that follows a standard format in which the member

identifies the law, regulation, action, etc., that is at

issue, the precise content of which varies according to

the agreement and topic involved. These documents

are routinely filed and made available on the WTO

website to other members and the public. Specific

agreements may also require that members take other

steps to promote transparency. The agreement dealing

with sanitary and phytosanitary (SPS) measures, for

example, not only obliges members to publish all SPS

measures and notify changes that are made to them,

but further requires that they identify a single central

government authority responsible for the notification

requirements (i.e. the national notification authority)

and establish a national enquiry point responsible for

answering questions from other members about SPS

measures and related issues.

Compliance with notification requirements is uneven.

Most developed countries appear to file most of the

required notifications most of the time, and the same

can be said for some of the developing countries, but

many of the poorer and smaller developing countries

struggle to meet this obligation. A single example

suffices to illustrate the problem. The Agreement on

Subsidies and Countervailing Measures requires that

members make a subsidy notification no later than

30 June of each year, whether or not they employed

any subsidies. In 1995, when there were 112 WTO

members, 56 of them notified subsidies and 27 made

a nil notification of no subsidies; that left 29 members

(25.9 per cent ) that failed to meet the obligation to

notify. The rate of non-compliance rose steadily

thereafter, to the point where in 2015 there were 106

members (65.4 per cent of the total) that had failed

to make the mandatory notification.16 This failure to

comply with a notification requirement is by no means

the most serious problem that the multilateral system

faces; yet it is symptomatic of a declining commitment

to abide by the norms of that system.

Members and the WTO secretariat have addressed

the problem of incomplete notifications from two

directions. One approach views the number and

complexity of the requirements as the root of the

problem, with developing countries proposing that

the burden be reduced and the procedures simplified.

These concerns led to such steps as the publication

of the Procedural Step-by-Step Manual for SPS

National Notification Authorities and SPS National

Enquiry Points, a guidebook with detailed instructions.

Some WTO committees have also worked to simplify

procedures for the notifications that fall within their

purview. The other response has been for the

secretariat to provide greater assistance to developing

countries in complying with these obligations. This is,

together with accessions and scheduling, one of the

highest priorities in the technical assistance that the

secretariat offers to members.

The WTO’s Trade Policy Review Mechanism is another

and more thorough form of soft enforcement. It

provides for regular diagnostics of all members’ trade

policies, with members being subject to a review once

every two, four or six years (depending on their weight

in global trade). The results of these reviews can help

a country to identify areas where its own laws and

policies may need to be brought into compliance,

and also — although explicitly not intended to serve

as a basis for the enforcement under the dispute-

settlement procedures — to determine whether its

trading partners are living up to their obligations. This

process and its relationship to TPFs are taken up in

part VI of this manual.

2. Hard enforcement: Dispute settlement

WTO and other trade forums serve not only as

sites for the negotiation of agreements, but also

for the adjudication of disputes that arise over their

implementation and interpretation. While all WTO

members have access to the Dispute Settlement

Body, not all of them either bring complaints to this

body or are subject to complaints from their partners.

The great majority of the cases brought to the Dispute

Settlement Body involve developed countries, the

larger developing countries, or both.

The data in table 20 summarize the level of developing

countries’ involvement in WTO dispute settlement

through mid-2016. There are eight developing

countries with extensive participation in cases, having


each engaged in at least 10 cases as a complainant

and another 10 or more as a respondent. These are

mostly large, middle-income Asian and Latin American

countries. Fourteen other developing countries have

been a complainant at least once and a respondent

at least once. Another 10 have been complainants

but not respondents, and 3 have been respondents

but not complainants. That makes 45 developing

countries altogether that have had at least some direct

experience in the Dispute Settlement Body, accounting

for about one third of all developing country members

of WTO. Many of the others have been third parties

to one or more disputes, often with the simple aim of

learning how the process works, but have otherwise

had no exposure to it.

It is worth noting that the patterns of participation in

dispute-settlement cases are generally comparable to

those observed before with respect to the antidumping

cases (table 13). This is not entirely coincidental,

considering the fact that a great many cases concern

measures that a member has taken under the

antidumping laws. Those countries that either impose

the most antidumping orders, or are subject to most

orders, are the same ones that most frequently find

themselves either defending or challenging these

orders in the Dispute Settlement Body.

Developing countries face several practical barriers to

their effective participation in the dispute-settlement

system. The greatest of these is the need for expertise

in the law and process of WTO disputes, a field of

knowledge and practice that some developing

countries have cultivated (notably in China and in

Latin America) but that is lacking in most others.

This is a lacuna that can be filled by hiring lawyers

that specialize in this practice, but their services do

not come cheaply. Another concern is that the aim of

the system is not development but legal compliance.

Participation in the dispute-settlement system may

also be affected by cultural considerations. There

are some cultures that view the legal resolution of

disputes as a welcome alternative to reliance on

power politics, and where the pursuit of a person’s

legal rights is not seen as an act of aggression. Others

tend to see disputes as unfriendly proceedings that

are undesirable because one of the parties is bound

to lose face. Developing countries that inherited their

legal systems from England, Portugal, or Spain appear

to be more comfortable with litigation than are those

Table 20. Number of WTO disputes involving developing countries, 1995–2016

Source: WTO data at https://www.wto.org/english/tratop_e/dispu_e/dispu_by_country_e.htm.

Notes: Data are through July, 2016; does not include data on countries’ participation as third parties. Data refer to cases in

which the member was either a complainant or a respondent.

No cases 1 case 2–9 cases 10 or more cases

Complainant in

10 or more cases

— — — Argentina, Brazil,

China, Chile,

India, Indonesia,

Republic of Korea,

Mexico

2–9 cases

Egypt, South

Africa

Dominican

Republic,

Nicaragua,

Venezuela

(Bolivarian

Republic of)

Colombia,

Ecuador,

Guatemala,

Pakistan, Peru

Philippines, Turkey

Thailand

Respondent in

1 caseTrinidad and

Tobago

Malaysia, Uruguay Panama —

No cases

All other

developing

countries

Antigua and

Barbuda,

Bangladesh,

Cuba, Hong Kong

(China), Singapore,

Sri Lanka

Costa Rica,

Honduras, Taiwan

Province of China,

Viet Nam

—


countries where legal systems were either inherited

from France or are primarily based on indigenous legal

traditions. These differing perspectives may go a long

way towards explaining why even relatively small Latin

American countries such as Ecuador and Honduras

have brought multiple cases to the Dispute Settlement

Body, but to date no sub-Saharan African country has

been a complainant in a single WTO dispute. Most

Asian countries show a similar reticence, but that is

not an absolute rule.

There are steps that countries can take to enhance their

capabilities in this area. One simple and inexpensive

way to build capacity is to follow the advice that

countries are often given to participate as third parties

in disputes between other countries. A WTO member

need not have a direct interest in a case, or play an

active role in its adjudication, in order to participate as

a third party. Other members recognize that this is one

means by which diplomats from developing countries

learn the ropes of the dispute-settlement system.

Developing countries can also receive help from the

Advisory Centre on WTO Law (ACWL), an institution

that renders legal assistance in dispute-settlement

cases. Membership dues and fees for ACWL services

are assessed according to a sliding scale. Among the

services offered are legal advice on WTO law, support

in WTO dispute-settlement proceedings, seminars and

internships. The ACWL’s role in most cases is to assist

the complainant country rather than the respondent.

ACWL’s legal opinions may also help developing

countries in the conduct of trade negotiations.

Among the issues on which ACWL has helped

countries to understand their rights and obligations

include such diverse matters as tax rates, balance-

of-payment concerns, import and export restrictions,

renegotiation of tariff commitments, national security

exceptions, intellectual property rights, trade-remedy

laws, technical regulations or standards affecting

the sale of goods, and legal issues relating to trade

in services. ACWL also provides capacity-building

assistance through training courses, seminars and

workshops, and runs a secondment programme for

trade lawyers through which government lawyers from

developing country members and LDCs join its staff

as paid trainees for a nine-month term.

No amount of technical assistance can change the

fact that the smaller developing countries have less

leverage in the event that a case comes down to

retaliation. The magnitude of retaliatory measures that

are permitted to be imposed is determined more by

the size of the complaining country than by the size of

the respondent, meaning that the dynamics in a small

country versus large country case are very different

than those in which two large countries are involved.

Antigua and Barbuda managed to win a ruling that

United States restrictions on Internet gambling violated

that country’s GATS commitments, for example, but

the retaliation that this small member was authorized

to impose on the United States had little impact on

Washington. By contrast, when Brazil won a ruling that

the United States had violated its commitments not to

subsidize cotton the retaliatory power given to Brazil

was much more persuasive. The Cotton Four African

countries did not have the same leverage as Brazil,

which is one reason why they chose to negotiate on

that same topic when Brazil had opted to litigate.

D. TRADE AND INVESTMENT PROMOTION

Trade strategies often place greater stress on trade

promotion than on negotiations, focusing on the ways

that a country can take advantage of the opportunities

created by the agreements that have already been

reached. This practice is especially prevalent for poorer

countries in which supply-side constraints are often

greater than barriers on the demand side, and for units

of government that do not have responsibility for trade

negotiations. A TPF should examine and assess the

promotion programmes that a country currently has in

place, including any evidence that quantifies the actual

trade and investment that these programmes may

have stimulated, and consider whether any changes

might be appropriate.

Adopt and implement investment promotion regimes for

least developed countries.

One of the 19 targets under Sustainable Development

Goal 17:



The TPF should investigate whether the country’s

embassies and other missions abroad provide

adequate assistance. Some governments take a very

active role in the promotion of trade and investment,

and have the resources to deploy diplomats and

other staff that deal separately with economic and

commercial matters. They may divide their staff into


A strong investment promotion agency … should be

empowered to drive the process in government. Not

only would it require technical capacity to understand the

[global value chains] and [multinational corporations] being

targeted, but it would also require strong political support

within government to overcome the inevitable political

and bureaucratic hurdles that will arise in the process of

negotiating with lead [multinational corporations].


sectoral topics (e.g. agricultural attaches) so as to

assist specific constituencies. Others require that one

or two officials take on a variety of duties. The trade

and investment promotional offices will sometimes be

housed in an embassy, or may be both physically and

legally separate from it. Whatever the structure may

be, these offices act to promote the country’s exports

and to attract foreign investment through a variety

of activities, including participation in trade fairs and

other promotional events, developing market leads

that are publicized at home, providing briefings and

other advisory services to domestic and international

businesses, and liaison with the host government on

economic and commercial matters.

The TPF for Panama called for a comprehensive,

innovative, and coherent marketing strategy to support

the exports that contribute more to development

goals. That may entail participation in such export-

promotion initiatives as fairs, business roundtables,

road shows, and direct business contacts between

exporters and potential clients. Market intelligence is

also critical to provide the necessary guidance to the

private sector about opportunities in foreign markets.

Consideration should be given to the roles of both the

public and the private sector. In some countries the

private sector takes charge of these programmes,

either solely or in collaboration with the government, of

the trade and investment promotion agency. In Costa

Rica, for example, the Foreign Trade Promotion Agency

(PROCOMER) is a non-state public entity responsible

for promoting exports, administering the free zone

regime, and promoting supply linkages between local

and multinational businesses. Similarly, the Costa

Rican Coalition for Development Initiatives (CINDE)

is a private organization that promotes domestic and

foreign investment, monitors businesses and markets,

and provides direct services to investors.


Trade pol icymaking institutions

V

If the typical observer were asked what a trade

ministry does, the most likely answer would be a

single word: negotiations. While that answer is partly

true, it is misleading on two points. One is that it

severely conflates a multifaceted series of actions that

need to be taken before, during, and after the actual

negotiations with foreign counterparts; negotiations

require careful preparation and detailed follow-

through. The other problem with this answer is that

it implies that the sole functions of the trade ministry

are externally oriented. The removal of domestic

constraints to trade is as important as the elimination

of foreign barriers, and a trade ministry’s domestic

diplomacy with its domestic partners inside and

outside of government are no less important than its

bargaining with foreign counterparts.

The analysis that follows is based on the premise

that trade policymaking, like charity, begins at home.

That is true even of trade negotiations with foreign

partners, which might best be perceived as a two-

stage and a two-level game. The stages are divided

between preparation and negotiation, and the levels

are the domestic and the international processes.

Understanding the two stages of negotiation means

devoting at least as much energy to the preparation

for bargaining as one does to the execution of this

task, and understanding the two levels of negotiation

means recognizing that the trade ministry’s domestic

operations are at least as important as its dealings

with its foreign counterparts.

It is important to note at the outset that the creation of

institutions is not merely a prerequisite to development,

but is in a real sense the very essence of development.

It would be a mistake to see development solely as

an economic process, and one that can be measured

through such simple metrics as growth rates or

income levels. It is instead a multifaceted process

that has important political and social dimensions.

These include stable environments, well-functioning

institutions, and the rule of law. A TPF should describe

the existing institutions of government, especially

those involved in the making of trade policy, and

consider whether any reforms are warranted. The

recommendations need not entail a complete

revamping of ministerial responsibilities, but it would

be a rare country indeed where improvements could

not be made in the frequency and quality of the

consultations conducted within government and

between the public and private sectors.

A. JURISDICTION AND RESOURCES OF A LEAD MINISTRY

How should a trade ministry be organized? That

question can be broken down into several smaller

ones, starting with which government agency should

take the lead in this field. These are issues for which

it is difficult to offer a definitive list of universally

best practices, as the differing arrangements that

countries make will vary greatly according to their

constitutional requirements, political traditions and

economic resources. In this section we venture only to

identify the range of distinct experiences, commenting

on the advantages and disadvantages of different

approaches.

1. Which ministry should lead on trade?

Trade policy is conducted at the busy intersection of

development policy, foreign policy, and fiscal policy,

and it occasionally reaches junctures with other areas

such as social and environmental policy. There are

many different ways that a country might choose

to reconcile the often-competing demands of the

ministries that are tasked with making and executing

policy in these distinct areas.

The most traditional division of labour assigns the

negotiation of trade agreements to the ministry of

foreign affairs, on the rationale that trade policy is

one dimension of foreign policy and the negotiation

of treaties is best left to diplomats. The advantages

of housing this responsibility in the ministry of foreign

affairs include greater coherence between foreign and

economic policy, a lower probability of capture by

domestic interests, and a greater likelihood that the

country will efficiently use its worldwide network of

embassies, missions, and consulates. These outposts

can provide invaluable economic information,

political intelligence, and logistical support for trade

negotiators. This organizational model may also be

attractive to countries that aspire to treat trade as

an instrument of foreign policy, whether that means

negotiating trade agreements with friendly countries

or directing sanctions at others.

There are also disadvantages to this approach. A

ministry of foreign affairs may place other diplomatic

or security objectives ahead of trade goals in the

hierarchy of objectives. This is precisely why the United


States Congress removed authority over trade policy

from the State Department in 1962, for example, and

transferred the portfolio to the predecessor agency

to the Office of United States Trade Representative

(USTR). Colombia and Costa Rica are among the

other countries that have adopted similar decisions.

Another problem with housing trade policy in the

foreign ministry is that career diplomats who are

trained to be generalists do not necessarily have the

specialized, technical knowledge required in modern

trade policymaking. When trade negotiations were

mainly about reducing or eliminating tariffs a diplomat

could, with the appropriate instruction, learn the

essentials in fairly short order. The same cannot be said

for today’s more complex issues such as financial and

telecommunications services, investment, intellectual

property rights, and sanitary and phytosanitary

measures, each of which require that policymakers

develop deeper and wider expertise. This problem

has been solved in some countries by integrating

foreign and trade ministries into a single ministry. That

approach is common to certain developed countries

(e.g. in Australia, Canada, and New Zealand) as well

as developing countries (e.g. Brunei, Jamaica, and

Kenya).

In recognition of the potential shortcomings of this

most traditional model, three other variants have been

tried:

• A ministry of trade and industry may take the lead.

This model has the advantage of integrating both

industrial and trade policies into a single framework.

• Trade policy may be the responsibility of the

ministry of economy (sometimes called the ministry

of development), thus acknowledging the link

between modern trade policy and a wider range of

objectives such as the promotion of employment,

diversification, and inclusive growth.

• A third model is cantered on a dedicated trade

institution. Two versions of this approach include the

special case of the United States, where negotiating

is almost all that the USTR does, and the more

typical arrangement in which trade ministries have a

broader set of trade-related responsibilities such as

trade and investment promotion.

Not all trade ministries will fit neatly into one of these

categories. Some of them bear titles that suggest a

diverse range of responsibilities, such as the Ministry

of Industry, Trade and Labour (Israel) or the Ministry

of Commerce and Supplies (Nepal). The long list of

responsibilities that may be assigned to the trade

ministry can lead to equally lengthy titles, as in the

case of the Ministry of Trade, Investment Promotion,

Private Sector Development and Consumer

Protection (Belize), and the Ministry of Trade, Industry,

Private Sector Development and Presidential Special

Initiatives (Ghana).

Whichever ministry is given the lead, three cardinal

rules should be followed. First, all other ministries

and agencies dealing with the large and expanding

subject matter of trade policy need to be consulted

regularly in any initiative affecting the topics within

their jurisdiction. Second, governments should resist

the temptation to reassign this topic from one agency

to another whenever there is a shift in national policy.

Those changes, even when well intentioned, can

disrupt the work of the officials assigned to deal with

trade. Third, any officials with responsibilities for this

area of public policy — whether they are part of the

lead ministry or in other government agencies —

should be given the tools and training they need to

carry out their assigned tasks correctly and efficiently.

That is the topic to which we now turn.

2. Staffing and capacity

Trade ministries differ not just in shape but in size. The

complement of personnel may range from fewer than a

dozen persons in the smallest countries to hundreds of

them in the largest. One might naturally suppose that, all

other things being equal, a government agency’s ability

to achieve its goals will rise with the size of its staff. All

things are not equal, however, and the preparation of

the officials in a ministry is ultimately more important

than their sheer numbers. A small group of well-trained

and motivated officials have a much better chance

of achieving their aims than a large body of people

who lack the necessary skills and direction. It should

also be acknowledged that the number of personnel

assigned to a trade ministry, or indeed to any other

governmental institution, will not be determined solely

by that agency’s needs. All governments, whether

developed or developing, operate under budgetary

restrictions and civil service procedures that cannot be

easily overcome, and will usually need to be treated as

immutable in the short term.

What sort of person should a trade ministry hire? One

great irony of the trading system is that the best policy

professionals are willing and able to violate regularly

the system’s central premise. Adam Smith argued that

specialization determines productivity in an enterprise,

and if we were to apply this same division-of-labour

V. TRADE POLICYMAKING INSTITUTIONS 53

logic to government we might propose a strict sep-

aration between the economists, lawyers, and other

specialists who become public servants. That would

be a distinctly bad idea in the field of trade policy,

however, where the ideal policymaker is a “jack of all

trades” whose perspectives are not limited by the title

displayed on a diploma. A trade ministry should ideally

be staffed by professionals from a variety of fields, but

all of them should be encouraged to acquire a working

knowledge of subjects outside their chief areas of ex-

pertise. It is just as important for an economist to un-

derstand the basics of trade law as it is for a lawyer to

understand the laws of supply and demand, and peo-

ple in both of these professions have much to learn

from — and to share with — the political scientists,

area specialists, information-management experts, or

others who draw their pay from the trade ministry.

That ideal is difficult to attain, as many trade ministries

in developing countries must deal with serious

capacity problems. This is especially true in smaller

countries with commensurately small ministries, where

it is not uncommon for the majority of the staff to be

recent college graduates who have as yet spent little

time outside of the classroom. Some among them

may accept government positions because they are

the only jobs in the capital city that require education

but not experience, and they may plan to leave for

better-paying positions in the private sector as soon

as they have accumulated the necessary amount

of training, skills, and contacts. This can create a

cycle of frequent turnover, robbing the ministry of the

knowledge, networks, and institutional memory that

are so important to effective policymaking.

The obvious answers to this problem are to increase

staff salaries and to expand capacity through training

and retention, but those solutions may be beyond the

budgetary limits within which ministries must operate.

They may also run into a well-known dilemma in

capacity-building by which the efforts put into the

upgrading of personnel will increase their potential

value to another employer (public or private, domestic

or international), thus accelerating the brain drain.

Donors often solve this problem by requiring that the

recipient of any training pledge to remain in government

service for some minimal term as a prerequisite for

receiving this support. Another difficulty is that, in the

view of some critics, capacity-building programmes

can sometimes be built more around the interests of

the donors than the recipients.

There are means by which trade ministries can enhance

their human resources at minimal budgetary cost.

Some donors will support the hiring of trade advisors

for ministries, drawing upon consultants who may

themselves be former officials in national governments

or international organizations. Similarly, some countries

and international organizations sponsor programmes

by which officials from one country may be seconded

to others on temporary assignments. Resources are

also available for the outsourcing of specific tasks to

international organizations or the consultants that they

may hire. All of these alternatives are best seen as

stop-gap measures, as it is in the best interests of a

ministry to develop and retain the in-house capacities

and to foster the institutional memory needed over the

long term.

A TPF should provide an assessment of the capacity

deficits that may exist in the trade ministry and other

government agencies that deal with trade, and make

recommendations on how any skills gaps at might be

closed. The trade ministry should take advantage of the

training and other technical assistance programmes

made available by international organizations and

educational institutions (box 6).

B. NEED FOR INTERNAL COORDINATION AND CONSULTATION

While the activities most typically associated

with the trade ministry concern relations with its

foreign counterparts, the day-to-day operations of

that ministry will more typically involve domestic

consultations. Properly conceived, the most important

function of the trade ministry in a developing country is

to ensure that country’s trade instruments — including

its international agreements and domestic laws —

serve the broader interest of promoting national

development. The trade ministry is also tasked with

ensuring that the other laws and agreements of the

country are consistent with the legal obligations that it

has undertaken in WTO and other agreements. Taken

together, these functions constitute the domestic

diplomacy of trade policymaking. In order to act

effectively as the country’s agent abroad, the ministry

must be intimately engaged in policymaking at home.

That domestic diplomacy requires that the ministry

in charge of this topic coordinate closely with

other government agencies, and consult fully with

representatives of civil society. That is necessary not


Box 6. Capacity-building programmes for trade officials

Numerous programmes are available to help trade ministries and other government agencies overcome their skills deficits.

Some of these are hosted (and often paid for) by international organizations, while others are offered by universities on

either a degree or a non-degree basis.

The choice of which type of programme to pursue, and where to pursue it, depends in part on how much time and money

a ministry or its employees can afford to invest. While tuition and other costs for some university programmes can be high,

assistance may be available from development banks and other donors; further information can be had from the WTO’s

Global Trade-Related Technical Assistance Database. For those already in government, the most significant expense may

be the opportunity cost of time spent out of the office. The investment should nevertheless pay off if programmes impart

the needed skills. Expenses can also be reduced by using the online training modules that WTO increasingly favours over

face-to-face courses.

UNCTAD provides toolbox on trade-related capacity building support and training for trade negotiators and policymakers

from developing countries on Trade Policy Frameworks, multilateral and regional trade negotiations including WTO

accession, and services development and trade, including Services Policy Reviews (SPRs). Of particular note is UNCTAD’s

toolkit on services, combining analytical studies on all aspects of services including services sector development and

structural transformation, Service Policy Reviews, Multi-year Expert Meeting on Trade Services and Development and the

Global Services Forum. Through SPRs, UNCTAD supports policymakers in assessing the potential of services capacities

as well as various options for policy, regulatory and institutional frameworks, the findings of which could be fed into

national policymaking and international trade negotiating process. Trade Policy Framework supported national trade policy

stakeholders in raising awareness and building their understanding on the contribution of trade to sustainable development

and the formulation of Sustainable Development Goal-oriented trade policy frameworks.

Training is also available from universities, where programmes can last anywhere from days to years. At one extreme are

the masters or even doctoral programmes in public policy that allow students to specialize in trade and related fields. The

Paris School of International Affairs and Sciences Po, for example, jointly administer a Master’s in International Economic

Policy programme. Some universities have specialized, one-year programmes that grant interdisciplinary master’s degrees

in this field, such as: The International Economic Law and Policy (IELPO) programme at the University of Barcelona; The

Shridath Ramphal Centre for International Trade Law, Policy and Services, University of the West Indies; and, The University

of Bern’s World Trade Institute has a programme.

Some universities have much shorter executive education programmes that are built around the needs of busy professionals.

The Harvard Kennedy School’s course entitled Mastering Trade Policy compresses a semester of economics, law, and

negotiations theory into 10 intensive days. Other schools with non-degree programmes on trade and related topics include

the College of Europe, the Johns Hopkins School of Advanced International Studies, the London School of Economics,

and the Monterey Institute of International Studies. Some schools also offer specialized courses to be delivered either on-

site or at the university’s home campus.

merely to ensure that trade policy per se is effective,

but also to make it consonant with the broader

development goals of the country. While trade and

development goals are not in direct conflict, reconciling

their sometimes-divergent objectives can raise difficult

questions of priorities and coherence.

The expanding subject matter of trade policy multiplies

the risk that officials in different areas of public policy

might work at cross purposes. In the absence of

a cooperative and collegial approach among all

ministries with an interest in trade-related matters,

negotiators will not have the information they need

to reach agreements with their foreign counterparts,

nor can they be certain of receiving the political

support necessary to approve and implement these

agreements at home. In this age of deeper integration

and wider commitments, there is also greater jeopardy

that a ministry with jurisdiction over some trade-

related topic (broadly defined) may unknowingly take

action that violates a pledge the country has made to

its partners in WTO or some other trade agreement.

Active and effective trade policymaking depends

critically upon consultation between the government

and the private sector, and between the many different

governmental bodies that are either directly or indirectly

involved in making and executing trade policy (box 7).

These consultations must take place in both directions,

such that trade and non-trade people speak to one

another about how trade initiatives affect other areas

of public policy and vice versa. Consultation is not a

one-off proposition, but must instead be done regularly

before negotiations commence (when researching the


Box 7. Consultative mechanisms in developing countries: Examples from TPFs

“A well-articulated trade policy with buy-in from the trade policy community has higher probabilities of providing effective

guidance for applying a holistic and coordinated approach to trade policy formulation, negotiations, implementation,

monitoring and reporting, ” according to the TPF for Rwanda (p.4). “In a situation where each individual ministry dealing

with some elements of trade has often done things disparately,” according to the report, “it has not been easy to fashion

and implement a coherent ‘one-shop trade policy’.” That TPF likened the role of the MTI not to an isolated ship, but instead

to a “tugboat pulling the barge” that carries all other relevant ministries and stakeholders. It recommended that a Trade

Development Board be set up “at the senior policymaking level to serve as the governing and coordinating mechanism

under which inclusive decision-making would take place to formulate, adjust and implement the development-oriented

trade policy” (p.57).

Other TPFs highlight the importance of consultative bodies in their respective countries, such as the following:

• In 2004 Algeria created the Conseil National Consultatif pour la Promotion des Exportations, which is supposed to be

chaired by the head of government, but the institution has yet to be installed. The TPF also observed that in 2013 a

Doing Business Committee was set up, but questioned its capacity to coordinate interministerial action. It proposed

creation of a higher-level structure with greater legal powers to enact reforms.

• Botswana has both a High Level Consultative Council (HLCC) to manage the partnership between government, the

private sector, and civil society, as well as a National Committee on Trade Policy Negotiations (NCTPN). The HLCC

includes all cabinet ministers and industrial stakeholders, while the NCTPN has a wider membership as well as a

network of technical committees. The government also established a National Doing Business Committee to improve

the country’s standing in that World Bank index. The assessment report observed that the linkages between these

bodies are “unclear and require further investigation” so as to avoid duplicative efforts (p.44).

• The Jamaica Trade and Adjustment Team (JTAT) dates from 2001, and provides for consultations and coordination

between the public and private sectors. Its membership includes the trade-related ministries of government,

representatives of four business organizations, trade unions, civil society groups, and academia.

• Zambia has a National Working Group on Trade (NWGT) consisting of representatives from other government agencies

and stakeholders from the private sector. “There are, however, some limitations to the … arrangement,” according to

the TPF for Zambia. “[T]he arrangement is not institutionalized,” and it “does not meet regularly [and] is not funded.”

The TPF suggested that the NWGT be re-examined with a view to its reorganization, and that the trade ministry itself

may need to be restructured.

facts, deciding whether a specific agreement should

be pursued, and devising the country’s negotiating

objectives), while negotiations are underway (when

responding to a partner’s proposals and adjusting

one’s own positions), and after negotiations have

been concluded (when approving, implementing, and

taking full advantage of agreements).

The need for interministerial cooperation is quite

evident in the execution of any national measures that

are not designed for the express purpose of taxing or

regulating trade, but that nonetheless have a significant

effect on the movement of tradeables between

countries. This category includes not only those areas

where the connections with trade are obvious, such

as agricultural policy and industrial strategy, but also

such diverse areas as the environment, the budget,

social programmes, and cultural policy. It is vitally

important that a trade ministry act as the custodian

of the commitments that a country has made in WTO

and in its other international agreements, so as to

ensure that other agencies do not enact laws or adopt

regulations that inadvertently place the country at risk

of dispute-settlement cases.

1. Interministerial consultations

Table 21 offers insight into how the expanding scope

of trade issues has broadened the array of government

agencies that are affected by negotiations and disputes

in this area. Just a few decades ago, a trade ministry

would act primarily as the agent for the country’s

private sector and its ministry of finance. Acting on

behalf of the private sector, the trade ministry would

seek to secure deals that opened foreign markets to

the country’s exports while protecting some items

produced at home; acting on behalf of the ministry

of finance, the trade ministry would also seek to

ensure that tariff cuts did not sacrifice too much

government revenue. The consultations needed at

that time involved less than half of the cabinet in this

hypothetical government. The addition of new issues


Table 21. Illustrative list of government ministries with interests in trade and trade-related issues

TBT and SPS Measures = Technical barriers to trade and sanitary and phytosanitary measures.

* The topic of intellectual property rights includes geographical indications.

§ For purposes of this illustration it is assumed that the country has a Ministry of Trade and Industry and does not make

trade chiefly the responsibility of some other agency.

† For purposes of this illustration it is assumed that the patent and trademark office is housed in the Ministry of Justice.

‡ For purposes of this illustration it is assumed that the Ministry of the Interior is responsible for administering the country’s

immigration system.

Ministry’s principal concern with the issue relates to the economic interests (offensive and/or defensive) of its private sec-

tor constituents.

Ministry’s principal concern with the issue relates to topics within its administrative/policy control.

Ministry’s principal concern with the issue relates to its own operational or budgetary needs.

Ministry Ministry’s principalprivate sector consituency

Tariffs and quotas

Trade in services

Intellectual property*

TBT and SPS

measures

Labour and environment

Governmentprocurement

Trade and Industry§Industry (especially

exporters)

AgricultureFarmers and

ranchers

EnergyEnergy producers

and consumers

Labour Workers

FinanceBanks, insurance

companies, etc.

Foreign Affairs —

CultureArtists, audiovisual

producers, etc.

HealthDoctors, hospitals,

and patients

Justice† Lawyers

EducationTeachers and

students

CommunicationsTelecommunications

firms, etc.

TransportationShipping firms,

truckers, etc.

Interior‡ —

EnvironmentNGOs and the

general public


It is critical that the country implementing a trade policy

adopts complementary policies in order to adapt the

domestic institutions, create the stable macroeconomic

environment necessary to promote growth, and facilitate

any adjustment costs arising from the adoption of new

trade policies.


has brought virtually every other government agency,

with the possible exception of the ministry of defence,

into debates over trade policy.

None of this is meant to suggest that the trade

ministry ought to invite every other government

agency to exercise a veto whenever it is concerned

that a proposal might cross jurisdictional lines. Were

it to do so, the trade ministry might soon find that it

has very little left on which to negotiate. What these

observations do imply is that it is incumbent upon that

ministry and its partners in other agencies to ensure

that the country’s negotiating positions are the product

of comprehensive consultations that weigh the costs

and benefits of making or requesting commitments

in any given area, and that the resulting agreements

stand a better chance of receiving the approval of the

cabinet, the legislature, and the general public.

2. Consultations between different levels and branches of government

A trade ministry should not confine its consultations to

other agencies of the executive branch at the national

level. Depending on the constitutional arrangements

within a country, it may also be necessary or advisable

to extend those consultations to the legislative branch

and/or to subnational units of government. This is an

area where it is more difficult to make generalizations,

given the diversity of political cultures, traditions, and

constitutions. Much depends on whether a given

country has a presidential or a parliamentary system,

and on the extent of the authority that is exercised by

smaller units of government.

Coordination between the ministries of finance and

trade is no less important today than it was in the

past. Trade taxes, which may be collected as tariffs

on imports and exports as well as consumption taxes

on imports, still account for a relatively high share of

total government revenue in numerous developing

countries. No matter what the precise level of fiscal

dependence on trade taxes, it is imperative that trade

policymakers work closely with budget planners

in preparing for all negotiations that may lead to a

reduction in tariffs. As things now stand in some

developing countries, budget planners have no way of

incorporating the projected results of trade negotiations

in their plans, nor of providing useful guidance to trade

negotiators regarding the budgetary consequences of

making proposed deals. If the two ministries do not

coordinate on these matters before and during a trade

negotiation the fiscal consequences of a given tariff

cut might have to be considered on a purely intuitive

basis, and after the fact.

Other ministries that might never have paid the

slightest attention to trade must now be consulted.

This point can be appreciated by considering the

many ways that the interests and authorities of the

ministry of health might now be affected by issues

that are on the table in negotiations or might be raised

in litigation. The country’s medical community is the

natural constituency of this ministry. It is doubtful that

most doctors, dentists, X-ray technicians, hospital

administrators, and others who work in this field think

of themselves as exporters of services, or that they

consider their tasks to be in competition with foreign

providers of these same services; it is equally doubtful

that the officials in the ministry of health will think of the

laws that they administer as being the subject matter

of trade negotiations. And yet that is precisely what

may happen if one of the country’s partners asks that

it make a commitment on trade in medical services.

The ministry of health will also have its own views on

the consequences of extending stricter protection to

patents on pharmaceuticals, the concessions that

might be made on tariffs and regulations affecting the

sale of alcohol and tobacco, and the “portability” of

health insurance across borders. Even if these issues

are not explicitly addressed in a trade agreement, it

is also possible that they will arise later in a dispute-

settlement case.

A coherent trade policy framework is needed because

of the fact that, upon attaining political independence in

1975, [Papua New Guinea] inherited from the colonial

administration a system of government that did not have

such a framework … The lack of a vision and coherent

trade policy has resulted in the development of ad hoc

and often conflicting rules, regulations and practices

affecting trade, and in an even greater disconnect

between trade policy framework and other key economic

(tariff, investment, industrial), sectoral (manufacturing,

agricultural, forestry, fisheries, minerals) and social policy

issues.

Papua New Guinea Trade Policy Framework (2006)


It is nonetheless worth observing that countries in all

quarters of the globe now find it necessary to consult

more fully with other branches and levels than they

did in the past. This is due not only to the changing

subject matter of trade, but also to more fundamental

shifts in governance. Democracy is more widespread

in the WTO era than had been the case in the GATT

period: 125 out of 195 countries (64.1 per cent ) were

electoral democracies in 2015, up from 69 out of 167

(41.3 per cent ) in 1989.17 The spread of democracy is

one of the most encouraging developments in recent

history, but in some countries it poses new challenges

for trade policymakers. National and even subnational

legislatures are more involved today in the making of

international economic policy, as are a bewildering

array of participants in civil society. The end result is

that the domestic diplomacy of trade policymaking

can be just as challenging for a trade ministry as are

its dealings with its foreign counterparts. Even some

countries with long democratic traditions are only now

extending greater authority to their legislative branches

in matters of foreign policy in general or trade policy in

particular. That is most clearly evident in the case of the

European Parliament, which under the Lisbon Treaty is

now more powerful vis à vis the European Commission

than in the past. The Inter-Parliamentary Union urges

that legislatures in other countries be equally active in

their scrutiny of international economic negotiations.

Any trade policy framework and strategy should emanate

from the aspirations of the nation and the various

stakeholders as to what kind of society and economy

they want to create.


Consultations also need to include subnational units of

government in those countries where these institutions

have jurisdiction over issues related to trade. This is an

area where policymaking is often more complex in larger

than in smaller countries, irrespective of their levels of

economic development. Whether the units in question

are called states (as in Brazil, India, Nigeria and the

United States), provinces (as in Canada, China, and

Turkey), or some other title (e.g. departments, länder,

or cantons), subnational divisions may have either

exclusive or shared jurisdiction over matters that have

come to be incorporated within the expanded definition

of trade policy. They can be especially active in the

regulation of such services as banking, insurance, and

education. Government procurement is another topic

over which subnational governments may jealously

seek to retain their autonomy, including the power to

extend preferential treatment to local providers. These

levels of government may also have limited authority in

such topics as sanitary and phytosanitary measures,

technical barriers to trade, and sales taxes. National

governments are well advised to consult fully with their

subnational counterparts on any topics that might

require implementation at their level.

3. Consultations with the private sector

The private sector is the ultimate beneficiary of trade

policy, and should be involved as much as possible in

its development and execution. Businesses are often

the most important source of information on other

countries’ trade barriers, apparent violations of trade

agreements, and related matters.

The importance of consultations is easily acknowledged

but not so easily executed. While many countries have

some type of public–private consultative arrangement

in place, relatively few function as well as they ought.

Officials in the public and private sectors of developing

countries often have parallel complaints regarding the

conduct of consultations. Whereas representatives of

the business community may criticize a government

for consulting with them only sporadically, and

doing so only when a policy is in the final stages of

development or adoption, government officials may be

equally unhappy with the input that they receive from

the private sector. Comments may come too late, or

not at all, and business representatives may raise their

objections only after a policy has been implemented.

Dialogue between government and civil society should

ideally be comprehensive, with the public sector being

both informed by and giving actionable information to

firms, industry associations, labour unions, and other

interested parties. Producers, workers, exporters, and

actual or potential investors need to know about any

anticipated changes in the trading environment that

might affect their opportunities or decisions. These

include not only those steps that the government plans

to take (e.g. the negotiation of a new agreement), but

also information that the government obtains on the

plans of other countries (e.g. if a certain programme

or policy in a partner country is expected to change).

Similarly, it is incumbent upon the business community

to keep the government informed of any developments

that should be taken into account in trade negotiations

or other initiatives. For example, businesses should be

encouraged to inform the government of any existing

or anticipated barriers to foreign markets.


Representatives of the private sector may also be

included in delegations to international meetings.

This is a common practice in some countries, and

ensures that policymakers have the benefit of on-the-

spot information and advice. Many trade negotiations

now include “parallel” events to which representatives

of civil society are invited, ranging from trade fairs to

seminars.

While it is important to foster consultation and

collaboration between the public and private sectors,

it is equally important to ensure that government does

not respond only to the most influential interests.

There is a distinct danger that the most organized

and connected groups in civil society might “capture”

government agencies, such that it is not the agencies

that regulate industry but vice versa. In the field of

trade policy, capture may manifest itself in unbalanced

representation that favours protection over consumer

interests. While it is economically rational for small

numbers of producers to band together in support of

continued protection, there is little incentive for large

masses of consumers to organize in counterpoise to

the protectionists. Skewed representation of interests

can result in equally skewed policies.

These observations point to the need to include a

wide range of civil society groups in consultations. In

addition to groups that represent industries, exporters,

and importers, a government should ensure that it

gives adequate voice to the interests of consumers,

service sectors (including the creative community),

and others whose interests were often overlooked

when trade debates were limited to issues involving

the cross-border movement of goods


VIBest practices for the conduct of

a trade pol icy framework

Box 8. Stages in the development of a trade policy framework

Step 1: Request. Unlike some other review procedures that are legally mandated by the organizations to which countries

belong (e.g. WTO) or the programmes from which they benefit (e.g. the Enhanced Integrated Framework for LDCs), a TPF

is an entirely voluntary undertaking that originates with a request from the beneficiary country. This will normally follow a

determination by the country that it has been underperforming in global markets, and would benefit from a reconsideration

of its strategy.

Step 2: Scheduling and selection. Upon receipt of a request, UNCTAD will seek to allocate the resources needed to

conduct a TPF, work with the government to draft the terms of reference for the project, and select the national and/or

international consultants that will execute the project.

Step 3: Basic research and document collection. Researchers will begin their desk work by collecting and reviewing such

documents as the country’s development strategy and any strategies in functional areas such as trade, the WTO’s most

recent trade policy review, and the statistics and reports prepared by other international and national bodies dealing with

economic and development issues. This step is especially important in defining the strategy that the country had pursued

to date, and in identifying the key questions concerning how that strategy might be improved.

Step 4: In-country research. The principal objective of the in-country research is to interview not just the relevant personnel

in the trade ministry, but also a wide range of persons who are knowledgeable about the challenges that the country faces.

This is the most time-consuming and critical phase in the process. When the budget permits, it is recommended that this

phase begin with a national seminar to which all public and private stakeholders are invited, together with members of the

donor community, and given the opportunity to present their views.

Step 5: Initial draft and circulation. The initial draft should be circulated widely among stakeholders inside and outside of

government. Sufficient time must be allowed for reviewers to examine and provide comments on the document (at least

one month).

Step 6: Revision and validation. Taking into account any comments received on the initial draft, the TPF should be revised

and finalized. It can then be presented for a national validation exercise, which will typically entail a seminar to which all

stakeholders will be invited. Depending on the constitutional rules and traditions of the country, the document might also

be subject to adoption by cabinet and/or parliament.

The preceding discussion has examined the

substantive issues that are covered in TPFs, but we

now turn to the process by which these instruments

are developed. Two points merit special emphasis.

The first is that one must not lose sight of the fact

that a TPF is just as much about development as it

is about trade, and that this point should be foremost

throughout the process of devising, adopting, and

implementing the TPF. The second is that the final step

in the process — the implementation — is ultimately

the most important. No matter how well researched

and written the report may be, it will count for nothing

if it is not backed up by the necessary political and

institutional support.

The TPF process as a whole can be divided into two

major phases, of which the actual preparation of the

document is only the first. As summarized in box 8,

this first phase can be broken down into six major

steps. The actions that are taken from the inception

through the completion of the document are critical,

but they are not sufficient. A TPF will count for nothing

if that first phase is not followed by the second,

implementing phase. This requires the necessary

institutional commitment to ensure that its goals are

pursued, monitored, and — if necessary — adjusted

to account for new developments. This point is

emphasized in the principles laid out in table 22, and

elaborated upon throughout this part.

A. VISION AND OWNERSHIP

The two most important aspects of a TPF are the

overall vision that it provides for the place of trade

policy in the country’s development strategy, and the

national ownership of this vision. A TPF should offer

both an overview of the objectives and a reasonably

specific set of proposals by which the larger goals

may best be accomplished. It can be all too easy to

fall into the rhetorical trap of offering generalities and

generic language, such that the authors present a

vision that could — with the simple substitution of the

country’s name — be considered applicable to almost

any other developing country (and not a few of the

developed). When writing a TPF, countries should

avoid the temptation to employ whatever buzz-

words and cant phrases that are currently popular in

policymaking and analytical circles, allowing clichés to

take the place of analysis and bromides to substitute


Table 22. Trade policy framework assessment criteria

Source: Adapted from the Assessment Report of the National Trade Policy for Botswana.

Institutional principles

Ownership The framework is owned and its implementation are systematically supported by the

stakeholders.

Champion The stakeholders must identify a strong champion and advocate of the framework. The

champion may be an individual or an institution, often from the private sector.

Clarity of roles A framework is implemented through a multi-stakeholder arrangement. The roles of the

government and private sector must be spelled out, with the plan providing for accountability,

deliverables, and a reporting arrangement. All roles should be coordinated through a committee

or unit that is empowered to facilitate and/or direct performance, and that ensures an effective

communication/information exchange across the network of players.

Organizing principles

Legally compliant A framework must be coherent with the country’s body of legislation. This includes internal,

regional, and international laws and treaties to which the country is legally bound.

Proactive and responsive The trade environment is dynamic. The framework must be able to position the country ahead of

foreseeable developments and should respond swiftly to a changing trading environment.

Timely Decision-making is backed by well-researched positions and data, but it is also swift and timely.

Execution and follow-through

Resources There is a well-resourced driving and coordinating unit with clear authority and transparency

to report results. All stakeholders involved in the implementation of the framework must have

adequate resources to carry out their assigned tasks.

Implementation The framework needs a strong senior-level policy committee and an effective coordinating unit

that drives implementation. It may also need special funding to bolster the capacity of the key

institutions.

Monitoring The framework must have a functioning internal mechanism for monitoring, evaluation, and

reporting, and this mechanism has to be answerable to the stakeholders.

for recommendations. The value of a TPF ultimately

rests on the ability of authors to combine a sweeping

vision with a concrete set of action-oriented directives.

One important aspect of presenting a vision is to

explain the reason behind preparing the TPF in

the first place. The decision to draft this document

will typically reflect a recognition on the part of the

country that the existing laws and policies have not

produced the desired results, and that reforms may

be needed in order to foster better opportunities and

outcomes. One way to do this is to offer a review of

the historical development of the country’s trade and

development policies, noting the main shifts that have

been made and how well the economy performed in

different periods. What has worked and not worked

in the past, and what lessons might be learned from

that earlier experience? What aspects of the present

set of policies seem inadequate, and what types

of reforms would correct these shortcomings? A

TPF with relatively modest goals will offer a detailed

statement of the prevailing trade and development

strategy, perhaps proposing that tweaks be made

to the policies that define that strategy, but will not

suggest fundamental changes. A more ambitious TPF

may argue that the time has come for the country to

undertake major changes in its strategy, and move

from the established policies and objectives into an

altogether new paradigm of trade and development.

To elaborate a bit more on the points laid out in box

8 and table 22, the research and writing phase of the

TPF is preceded by the request from the government.

This is not a mere formality, but is vital to the core

principle of ownership. The entirety of the TPF project

is founded upon the expectation that the government

is fully invested in the project, which is treated not as a

mere procedural requirement but as a comprehensive

process of self-examination and prioritization. All other

steps and principles proceed from this point.

VI. BEST PRACTICES FOR THE CONDUCT OF A TRADE POLICY FRAMEWORK 63

Without ownership, it would be very difficult for the

writers of the TPF to conduct the necessary research.

What is at stake here is not simply the accumulation

of legal texts, government reports, statistics, and

other raw data, but rather a detailed view of national

aspirations and the impediments that need to be

overcome in order to achieve them. That type of insight

can come only by engaging in a thorough and honest

discussion that explores these matters in depth.

Decision-makers, civil society representatives, and

opinion leaders cannot be expected to participate fully

in such an exercise unless they feel that they own it.

Ownership depends critically upon there being a

champion for the TPF, and that in turn requires

that there be a clarity of the roles played by distinct

institutions in the public and private sectors. Every

participant in the process should be considered a

stakeholder, but only one among them can act as the

champion. That champion need not be a government

official; there are strong arguments to be made in

favour of gibing that role to a leader in civil society.

Whoever takes on that task, be it an individual or an

institution, the champion will need to be backed up by

other stakeholders.

Beyond ownership, there are three other principles that

will ideally guide a TPF. The analysis needs to be legally

compliant both internally (with respect to national

laws) and externally (with respect to the country’s

commitments to its trading partners), it must take a

proactive and responsive position to a policymaking

environment that is not static, and it needs to offer

analysis and recommendations that are timely.

A TPF has no value if it is seen as a document and not

as a real commitment. The completion of the report

itself is not the culmination of the process, but instead

its beginning. A properly designed TPF will specify the

institutional responsibilities for its execution, including

timetables for specific goals and monitoring of

progress. It must provide for the resources necessary

to carry out the recommendations, and the proper

implementation of the TPF needs regular monitoring in

order to be effective.

What issues should be covered in this process? They

are too many and varied to be reduced to a simple

table, and will also vary somewhat from one country to

another. For checklists of questions to be asked and

institutions where these questions should be directed,

see the concluding part of this handbook.

What type of vision should a TPF present? There is

certainly no “one size fits all” prescription that every

country must accept, but a few broad guidelines are

suggested by the facts reviewed in this handbook.

Whether the aims of a TPF are modest or ambitious,

one of the key elements that shapes its vision concerns

the proper roles of the state and the market. Analysts

and policymakers continue to divide over the extent to

which the interests of developing countries would be

better served by giving either of these entities the lead

in making essential decisions over economic activity,

both in trade and in other areas, and also over the

question of whether the roles of these two institutions

should shift in response to a country’s development.

One may quite persuasively argue that not every

country can seek to replicate the experiences of

Hong Kong (China) and Singapore, due to the special

characteristics of those countries. One may further

argue that most developing countries would be better

advised to follow the Japanese and the Republic of

Korea’s examples by pursuing a two-stage approach

to market openness. But whether a country chooses

to open its market early or late in the development

process, it is quite evident that open markets, fair

institutions, and good governance are associated with

economic success. It is equally evident that trade is only

one aspect of a country’s overall economic policies,

and that the most successful countries pursue reforms

that cut across a broader array of policy areas. One

of the most valuable take-aways that a country may

receive in the TPF exercise is an understanding of the

place that trade plays in those larger reforms. Three

idealized strategic types are arrayed below, arranged

in roughly ascending order of the emphasis that they

place on open markets and the sequence that some

countries tend to follow if they calibrate their degree of

openness with their levels of economic development.

The key features are also summarized in table 23.

In the long term, specifically by 2030, Jamaica

seeks to achieve developed country status. Specific

national outcomes that should also be achieved by

that date include sustainable management and use

of environmental and natural resources, effective

governance, a healthy population (efficient delivery of

health services), world-class education and training,

strong economic infrastructure, energy security, a

technology-enabled society and the development of

Jamaica as an international shipping centre and logistics

hub.

Trade Policy Framework Jamaica (2015)


Countries that demonstrate the greatest degree

of reluctance to engage in either autonomous or

negotiated trade liberalization, and also depend on

preferential access to the developed markets, often

feel drawn towards an inward-oriented strategy.

Domestic trade politics in these countries may be

dominated by sectors that seek continued protection,

and there may be little pressure for liberalization.

The country’s trade strategy will typically stress the

importance of protecting infant industries through

relatively high tariffs and other instruments aimed

at restricting or regulating the penetration of foreign

goods; that may include a system of tariff escalation

under which the effective rate of protection on finished

goods is especially high. In these countries the state

typically plays a large role in guiding development,

and the country may also be dependent upon foreign

assistance.

Table 23. Characteristics of three idealized trade strategies of developing countries

Inward-oriented strategies Outward-oriented strategies Market-oriented strategies

Overall orientation Import substitution:

Country aims to promote

the establishment of new

industries through trade

restrictions and other favours

Export promotion: Country

aims to promote the exports

of its established industries

Open markets: Country aims

to compete on a more or less

even playing field at home

and abroad

Degrees and forms of commitment

May be reluctant to make

commitments at either the

multilateral or regional levels

Favours policy space,

and may make limited

commitments at both levels,

but is generally wary of

negotiating extraregional RTAs

Treaty commitments

complement domestic

reforms, and the country

may reach agreements that

are multilateral, regional, or

extraregional

Discrimination and non-discrimination

Seeks non-reciprocal and

preferential access to major

markets, and sees multilateral

liberalization as a threat to the

existing margins of preference

Will benefit from any

preferential access it has

to major markets, but if

necessary will also bargain for

access via multilateral deals

Favours open markets in

any form available, and may

be ready to lose preferential

access if needed in order to

reach multilateral deals

Types of countries favouring the strategy

Countries that feel especially

vulnerable, including LDCs,

landlocked countries, small

island states, etc.

Countries that have

achieved a higher level of

competitiveness, but are

not yet ready to remove all

barriers

Countries with high levels of

confidence in their ability to

compete in and benefit from a

global economy

Dominant sectors The agricultural sector is

typically much larger than in

the average country

The manufacturing sector is

significant, whether in labour-

or capital-intensive industries

The relative size of the

services sector may be nearly

as large as those in developed

countries

Vision

To establish a market-driven, development-led,

sustainable trade policy capable of catalysing expanded

economic growth, reduce poverty and attain improved

living standards for all Angolans.

Policy objective

To transform the economy, build sustainable,

inclusive development and economic resilience, attain

competitiveness and reduce poverty particularly in rural

areas through enhancing the contribution of all sectors

of the economy, in particular that of the non-oil sectors

to overall economic growth through export-led activities,

greater investments, domestic value added activities and

services exports. This transformation shall be private

sector-led.

Trade Policy Framework: Angola (2015)


As a general rule, countries that have achieved a

higher level of export competitiveness tend to favour

more outward-oriented strategies. These countries

may be successful exporters of agricultural goods (raw

or processed) and/or manufactured goods, and are at

least as interested in obtaining commitments for the

reduction or removal of foreign barriers to their exports

as they are in retaining their own protective barriers.

The country’s trade strategy is thus oriented at least

as much towards exports as it is towards imports, with

its outlook bearing a closer resemblance to classical

mercantilism than to either protectionism or free trade.

As such, there will be some products for which it

aggressively seeks the elimination of foreign barriers,

but others for which the country will seek to retain its

own protection. Countries in this category country are

often interested in maintaining its own policy space,

but also in receiving special and differential treatment

in any trade agreements that they negotiate. The

country’s dealings with the major trading powers will

be principally conducted via WTO, and while it takes

advantage of any preferential programmes offered by

those countries it may not be interested in negotiating

RTAs with them. Its own RTAs are typically confined to

those within its own region.

The countries that favour a market-oriented strategy

are typically the most economically advanced of

the developing countries. A very few of them may

favour such an approach from an early stage of their

development; the adoption of this strategy will more

typically be proceeded by the pursuit of an outward-

oriented strategy (which may in turn have been

proceeded by an inward-oriented approach). A market-

oriented strategy might thus represent the culmination

of a decades-long process by which the country has

progressively transferred ever more authority from the

state to the market in setting national priorities and

in determining what private industry and consumers

choose to produce, purchase, and trade.

Although there appears to be a general relationship

between the level of a country’s development and the

strategy that it adopts, it would be a serious mistake

to assume that this general rule is universally applied.

The TPF for Namibia certainly contradicts any such

claim. Despite the fact that Namibia is an LDC, this

TPF argues in favour of a strategy that leave more

room for the market than it does for the state. Taking

a dim view of the import-substitution doctrine that

has characterized that country’s trade strategy, the

TPF argued that “Namibia will find it very difficult to

Increase Aid for Trade support for developing countries,

in particular least developed countries, including through

the Enhanced Integrated Framework for Trade-Related

Technical Assistance to Least Developed Countries.

One of the 12 targets under Sustainable Development

Goal 8:Promote inclusive and sustainable

economic growth, employment and decent work for all


pursue” this approach successfully. Characterizing it

as a “coercive” strategy that would “us[e] instruments

such as investment conditions, trade protection, and

preferential sourcing,” the report presented instead an

alternative vision (see box 9).

B. CLARITY AND LEGAL COMPLIANCE

Countries do not have blank slates, but instead

accumulate a great many rules and commitments

that define the extent of the “policy space” within

which they operate. These include some domestic

instruments that may be considered permanent

(especially its constitutional arrangements) and the

commitments that it has made to its partners in

multilateral and regional trade agreements; others

are subject to periodic revision and adjustments (e.g.

annual budgets). A TPF should clearly identify all

relevant commitments, be equally explicit about the

types of laws and agreements that it advocates, and

ensure that any new initiatives that it proposes are

permissible within the existing legal obligations of the

country.

The term “treaty” is formally defined in article 2.1(a) of

the Vienna Convention on the Law of Treaties as “an

international agreement concluded between States

in written form and governed by international law,

whether embodied in a single instrument or in two or

more related instruments and whatever its particular

designation,” but it might alternatively and informally be

defined as an instrument by which countries mutually

agree to impose voluntary limitations on the exercise

of their sovereignty. This point is not unwelcome: It is

in the interests of all members of the trading system

that they operate within a body of well-understood

and enforceable rules, and those rules matter only if

they actually place constraints on countries.

Whether the agreements that they negotiate are

multilateral or regional, developing countries (other

than LDCs) are now expected to take on greater


Box 9. Strategic vision presented in the trade policy framework for Namibia

In our view [import substitution] is not likely to succeed for the simple reason that economies of scale in the domestic

market are absent, but also because the likely targets for such a strategy favour location in South Africa and, by virtue of

relatively free trade within SACU, can service Namibian markets from their South African base. While a mix of incentives

could be put in place, combining them with coercive instruments is likely to repel, rather than attract, foreign investors,

particularly the lead firms central to the next strategy option we outline below. Hence the “coercive” strategy runs the risk

of penalizing the Namibian economy as a whole, and poor consumers in particular.

An alternative approach is available. This could be framed as a “niche” strategy, wherein Namibia accommodates to its

structural realities by targeting specific niches in regional and global value chains into which its domestic producers could

plug, with a view to upgrading over time. In this approach the government’s primary task is to facilitate entry into value chain

networks coordinated by foreign lead firms, incentivising those firms to upgrade the participation of local firms over time.

The policy package associated with this strategy is essentially one of transactions costs reductions, business environment

reforms, and putting in place institutional supports to local business to improve their attractiveness to the lead firms

targeted. The risk with this approach is that Namibia may not be able to do what is necessary vis a vis the SACU common

external tariff (CET), since the CET is predominantly determined by South Africa; a reality that is likely to endure given South

Africa’s much larger and more diversified economy. However, there is an opportunity to differentiate Namibia from South

Africa, as Botswana now seems to be doing, since South Africa appears set on an import substitution path and foreign

companies are responding by looking for alternative investment locations in the region.

A hybrid approach is also conceivable. So, the Namibian government could decide which sectors or niches it wishes to

condition foreign access to for purposes of economic empowerment and/or production capacity building and make its

intentions known to the international community. This is most likely to work in those sectors where Namibia has real market

power, notably in uranium and fisheries but perhaps in other sectors too. Then it could pursue a policy of openness and

transactions cost reduction in those sectors where, in its judgement, it is unlikely to succeed with such an approach. As

long as this is done in a transparent, predictable, and stable manner it could work.


burdens than was previously the case. For the

multilateral system, that means ending the old practice

by which most developing countries were outside the

system and those that were in it opted not to sign

most agreements. Today nearly all countries are WTO

members, and all of them are obliged to adopt nearly

all agreements. At the bilateral and regional levels, that

means switching from arrangements by which they

enjoyed one-way, preferential access to the markets

of the industrialized countries to one in which they

make reciprocal commitments to open their markets.

C. TIMING AND RELATIONSHIP TO OTHER INSTRUMENTS

When should a TPF be conducted? The simple

answer to that question is, at the time when the

reception of its message may have maximum impact

in the beneficiary country. This would ideally come a

time when there is a widespread recognition that the

policies pursued to date have yet to deliver the kind of

results that policymakers and the public have hoped

for, and they are prepared to consider alternatives. The

more complicated answer to that question requires

that one take into account any other reviews that may

already be underway. The best timing for a TPF would

complement rather than compete with these other

reviews.

As summarized in table 24, the most important of

these other exercises are the Trade Policy Reviews

(TPRs) conducted for all members of the World Trade

Organization, and the Diagnostic Trade Integration

Studies (DTIS) for least developed countries. While

the purposes and contents of these studies differ in

various ways, there are several respects in which they

are similar to a TPF. In all three cases, the examination

requires a wide and deep exploration of a country’s

laws, policies, objectives, challenges, opportunities,

and results. The investigative procedures pursued

in all three of these exercises are similar, involving a

combination of desk work, extensive interviewing, and

validation procedures.

As a general rule, it would be redundant to engage

in any two of these exercises at more or less the

same time. The timing of a TPF should thus come at

a time when neither a TPR nor a DTIS investigation is

underway. It could be even more beneficial, however,

to time these exercises such that one followed closely

after another. If a country is subject to either a DTIS or


Table 24. Three assessment mechanisms

Trade policy frameworks Trade policy reviews Diagnostic trade integration studies

Eligible countries All developing countries All WTO members Least developed countries

Frequency Upon request Every two, four, or six years,

based on the country’s share

of world trade

Every five years

Administering agency United Nations Conference on

Trade and Development

World Trade Organization Executive Secretariat of

the Enhanced Integrated

Framework

Principal purpose Assist countries in identifying

their barriers to trade and de-

velopment and in overcoming

them

Ensure compliance with WTO

commitments

Assist countries in

mainstreaming trade into

development

Deliverables and results TPF report that presents

an overall vision of national

strategy and specific

recommendations for

achieving it

Report by WTO Secretariat

and meeting of the Trade

Policy Review Board

DTIS report that can mark

the transition from one tier

of Enhanced Integrated

Framework assistance to

another

a TPR in year 1, for example, it could be advantageous

to schedule the TPF for year 2 or year 3. In that way,

the TPF investigation could take full advantage of the

investigative work and policy recommendations that

may emerge from the first process. There may also

be advantages to scheduling a TPF so that its results

come a year or two before the next DTIS or TPR to

which the country may be subject. When pursued

in that order, the country may have the benefit of an

outside audit to give feedback on the conclusions

reached, and the preliminary execution of, its TPF

exercise.

It should be stressed that while all of these exercises

can benefit from the work done in others, none of

them should blindly accept the empirical information

that the others produce. Due both to the potential for

human error, as well as the need to update any time

series of data, whatever information is presented in

one report should be verified and updated before it is

adopted by another.

D. INTERNAL AND EXTERNAL CONSTRAINTS

“The enemy is anybody who’s going to get you

killed,” Joseph Heller had a character say in the

novel Catch 22, “no matter which side he’s on”. One

might adapt that idea to trade policy to state that, as

a general principle, the principal objective of a trade

ministry should be to reduce or eliminate any barrier

to the full participation of the country’s industries

in the trading system, no matter what its nature or

where it might be found. Some of those barriers may

be external constraints such as tariffs and non-tariff

measures imposed by partner countries, but many

others may take the form of internal constraints. The

latter includes capacity limitations that affect the

country’s ability to produce and export competitive

products (e.g. inadequate infrastructure, deficits in

human capital, etc.), as well as policies that might

discourage entrepreneurship (e.g. through heavy

taxation, regulation, or corruption). No matter where

these inhibitions originate, they should receive the

attention of the trade ministry and the TPF.

Many of the external barriers that developing countries

face have been greatly diminished over the past

generation, or have even disappeared altogether.

Whether as a result of dependence on primary

products, their eligibility for preferential programmes,

or their negotiation of regional agreements, many

small and poor countries have seen tariffs on their

exports whittled down to low or zero levels. This

will often mean that their opportunities to export

are determined more by capacity constraints at

home than by barriers abroad. For many of these

countries, the promotion and facilitation of trade are


more important than negotiation or litigation. Trade

liberalization has now progressed to the point where

protected sectors are the exception rather than the

rule in most developed countries, and the greatest

constraints on the opportunities of most developing

countries are internal rather than external. These two

points have tremendous implications for the workload

of trade ministries, where the domestic tasks are often

more important than the international. Put another

way, trade is determined more by the efficiency of

firms and the environment in which they operate at

home than by the trade barriers that governments

choose to impose, waive, or remove.

The fundamentals for long-term growth are human

resources, physical infrastructure, macroeconomic

measures and the rule of law. The role of trade policy

in economic growth is largely auxiliary and of an

enabling nature: extremes of export taxation and import

restrictions can surely suffocate nascent economic

activity, but an open trade regime will not on its own

set an economy on a sustained growth path. Too much

focus on “outward orientation” and “openness” can even

be counterproductive if it diverts policymakers’ attention

away from the fundamentals listed above and treats trade

rather than per capita income as a yardstick of success.

Rwanda’s Development-Driven Trade Policy Framework (2010)

The most important barriers to foreign markets

that do remain are primarily in the form of non-tariff

measures that are more often adopted for technical

than for protectionist purposes, but may nevertheless

have a restrictive effect. One frequent example is the

imposition of sanitary and phytosanitary measures

on products that can, if not handled properly, pose

threats to the health of consumers in developed

countries. The resulting restrictions on imports of

(for example) fruits, vegetables, meat, and fish from

developing countries are typically not manifestations

of protectionism per se, but are best seen instead as

external reflections of internal constraints. If countries

do not have in place the needed resources to meet

developed countries’ standards, such as safe and

reliable sources of clean water and electricity, they

may find their products excluded from these markets.

These are points that one finds reflected in the

TPFs produced to date. The TPF for Zambia, for

example, paid just as much attention to the NTBs

that the country itself imposed on imports from its

regional partners as it did on the NTBs that those

partners imposed on Zambian exports. Similarly,

the Jamaican TPF noted the problems encountered

in the development of new, processed agricultural

exports in an environment in which “standards are

increasingly stringent and constantly changing,”

and in which “compliance has considerable cost

implications, particularly for SMEs” (p.80). The TPF

for Rwanda likewise noted that the country’s coffee

faces no duties in major export markets, but as an

LDC the country lacks “capacity to meet standards

for its exports” (p.19). These include the European

Union’s standards with respect to ochratoxin (a type of

fungus) for roasted, ground and soluble coffee; United

States standards for pesticides in coffee and tea;

and food safety standards in Switzerland. The ability

of Rwanda to meet these standards is hampered by

the unavailability of the needed infrastructure and

personnel, obliging it to use services in other countries

in order to test its own products. That problem is

being ameliorated by strengthening the capacity

of the Rwanda Bureau of Standards, and obtaining

accreditation of its laboratories, but it is clearly a great

expense for a poor country.

The technical capacity of Botswana to implement and

monitor SPS measures … might be … strengthened

with the adoption of the National Quality Policy as an

instrument to ensure the WTO and SADC compatibility

of its internal standards and help local manufacturers as

well as importers to meet the fundamental objectives for

technical regulations, namely to ensure the health and

safety of society and the health of the environment.


Recognizing that technical barriers to trade are

partly a matter of national capacity, TPFs may

advance proposals to fill these gaps. Countries

that are members of customs unions or common

markets can sometimes achieve an economy of

scale by establishing such facilities on a regional

basis. In some cases, the regional project has yet

to achieve real progress in removing the standards

barriers that are erected among its own members.

The TPF for Jamaica, for example, notes that the

CARICOM Regional Organization for Standards and

Quality (CROSQ) was created in 2003 to promote

the harmonization of standards. “However,” the TPF

observes, “the ability of CROSQ to fulfil its mandate

has been limited” (p. 35). Jamaica has instead been

creating or reinforcing its national institutions, including

the Import/Export Inspection Centre and the Bureau

of Standards Jamaica.


The costs of border compliance that were reviewed

in part IV imply that most countries would be

well advised to attach at least as much priority

to reducing their shipping costs than they do to

reducing the tariffs of their trading partners. Some

of the determinants of these costs are not within the

capacity of Governments to change, especially sheer

physical distances, but the quality of infrastructure

and the efficiency of procedures certainly are. This is

not something that can be done solely by the trade

ministry, but will principally be in the province of the

agencies that administer customs and operate the

ports. Similar points can be made with respect to

the many other elements that go into determining the

competitive environment in a country. A country that

wishes to compete effectively in the global economy

cannot base its strategy solely on improved access to

foreign markets; it must also attend to all other issues

that affect the costs of producing and shipping goods

and services. One of the main roles of a trade ministry

is to serve as a voice for the trading community as the

Government sets its priorities, and to ensure that the

needs of this community are taken into account when

devising new policies and allocating resources.

The TPF for Rwanda drew a distinction between hard

infrastructure such as transportation networks and

other physical resources, versus soft infrastructure

such as policy and regulation, transparency,

predictability of the trade and business environment,

and customs procedures.

E. DATA COLLECTION AND ANALYSIS

One problem that is shared by those who prepare a TPF

and those who must execute its recommendations is

the difficulty in obtaining comprehensive, reliable and

timely economic data. In a perfect world, the public

and private sectors would have easy access to a

wealth of information on trade and investment in both

goods and services, as well as extensive figures on

national production, employment, and consumption

in a wide range of sectors. In the course of writing

a TPF, researchers may find their queries stalled on

several of these points. Some types of data may be

unavailable, while others are dated, incomplete or

simply wrong. The assessment report on Botswana,

for example, found very significant deviations between

the declared values of imports into Botswana and

the corresponding value data for exports from the

partner countries, as well as similar discrepancies

for Botswana’s exports that the partners imports.

These shortcomings present both a short-term and a

long-term problem. The researcher must often reach

defensible conclusions on the basis of incomplete

data, while also proposing ways that the country’s

collection, analysis and dissemination of data might

be improved in the future.

By 2020, enhance capacity-building support to

developing countries, including for least developed

countries and small island developing States, to increase

significantly the availability of high-quality, timely and

reliable data disaggregated by income, gender, age, race,

ethnicity, migratory status, disability, geographic location

and other characteristics relevant in national contexts.

By 2030, build on existing initiatives to develop

measurements of progress on sustainable development

that complement gross domestic product, and support

statistical capacity-building in developing countries.

Two of the 19 targets under Sustainable Development

Goal 17:



In the short term, the TPF researchers need to collect

all available data but must also be selective in its use.

It is important to resist the temptation to treat a TPF,

or at least its introductory sections, as a data dump

into which all manner of raw facts and figures can be

stuffed. What most matters in a TPF is not the bulk of

data but the quality of analysis, and the writers should

focus their attention on those statistics and other

information that are most relevant to their argument. It

may be appropriate to provide statistical appendices,

but the body of the document should present only

that information that helps the readers to understand

the argument being presented. It is also important for

researchers to verify the information that they collect.

Their task can often be facilitated by drawing upon

previous analyses, such as (for example) a recent

trade policy review of the country, but in so doing they

should use only the most recent information. If that

TPR presents information that was collected from

some national or international source, it is important

for the researchers to find out whether that same

source has since been updated.

The longer-term goal is to enhance the capacity of

policymakers to find and properly utilize data in real

time. The effectiveness of a trade ministry is determined

to a considerable degree by its capacity to manage


the flow of numbers, words and ideas. The information

and communications with which it must deal come in

a wide variety of forms: economic data on actual trade

and the barriers (tariff and non-tariff) imposed by the

country and its partners; legal understanding of the

existing treaties, laws, and regulations; knowledge of

the positions taken by other government ministries,

as well by the many components of civil society

(principally business, labour, agriculture and non-

governmental organizations); the views of like-minded

countries with which the country may engage in

coalition diplomacy; and political intelligence on the

interests, objectives, and influence of the key parties in

the partner country. A well-run trade ministry devotes

much of its resources to gathering, processing and

exploiting each of these types of information. In other

words, it must be prepared to calculate the data,

consult at home and coordinate with partners.

Issues such as intellectual property rights and

investment also pose difficult problems for analysts.

Once again there are shortcomings in the availability

and reliability of data, as well as greater legal

complexities. These are areas where a country may do

well to rely upon the analytical and technical assistance

made available by international organizations and

developments banks. Provided that one takes into

account their potential biases and agendas, it can also

be helpful to receive assistance from think tanks and

non-governmental organizations.

Researchers should take the fullest advantage of all

sources of trade, investment, and other economic

data, utilizing (among others) the sources listed in box

10. For comparative purposes, it may also be useful to

show where the country fits relative to its neighbours

and other peers in various trade-related indices. This

most prominently includes the Doing Business data of

the World Bank, but also includes a great many other

sources that provide rankings of countries on various

measures. These include the following:

• Index of economic freedom (Heritage Foundation/

Wall Street Journal)

• Foreign direct investment regulatory restrictiveness

index (OECD).

• Corruption perception index (Transparency

International).

• Human development index (United Nations

Development Programme).

• Services trade restrictiveness index (World Bank).

• Logistics performance index (World Bank)

There are steps that a TPF can recommend in order

to assist a country in its capacity to collect, analyse,

and disseminate data. The Rwanda TPF, for example,

observed that an Industrial Observatory Unit had been

set up in that country by the United Nations Industrial

Development Organization (UNIDO), but, for example,

and does so in large part through the computable

general equilibrium trade model of the Global Trade

Analysis Project. The TPF for Jamaica relies heavily

upon an analysis of the country’s revealed comparative

advantage in specific sectors and goods in order to

identify priority areas for further development.

Box 10. Sources of trade and tariff data

The World Integrated Trade Solution (WITS) at is a joint product of the World Bank and UNCTAD, in consultation with other

organizations. It gives users to access detailed information on trade and tariffs.

The International Trade Centre Trade Map provides tables, graphs, and maps on export performance, international demand,

alternative markets and competitive markets, as well as a directory of importing and exporting companies. Users from

developing countries can get full access to the tools free of charge.

The WTO has several tools available online for researchers. Its Statistics Gateway leads to the following resources:

• The Tariff Analysis Online facility allows users to access the WTO Integrated Data Base and Consolidated Tariff Schedules database, select markets and products, compile reports and download data.

• The Regional Trade Agreements Information System and the Database on Preferential Trade Arrangements pro-vide detailed information on the various agreements and programmes by which countries offer preferential treat-ment to specific partners.

• The Integrated Trade Intelligence Portal (I-TIP) provides practical information on a wide range of issues affecting specific products and sectors.

The trade data of the major developed countries are also useful as sources of mirror data on bilateral trade with those

countries. One example is the DataWeb of the United States International Trade Commission. The Eurostat database offers

pre-set reports on the bilateral trade of the European Union.


Conclusions and checkl ists

VII

A review of the dozen TPFs conducted to date

reveals that while there are some respects in which

developing countries’ circumstances and challenges

are comparable, there is also a great deal of diversity

in their experiences and prospects. It would be

a fool’s errand to try to derive a single set of one-

size-fits-all set of recommendations, and even if one

attempted to do so, it would not be resolved solely

through a review of the existing TPFs. The wide range

of perspectives on the role of trade in development

in these analyses can be appreciated by contrasting

those prepared for Algeria, the Dominican Republic

and Panama. They suggest differences in the present

predicaments of the countries subject to these

reviews and distinct points of view on how countries

should devise their strategies.

Consider the different approaches taken to that most

fundamental question, the sectoral composition of

the economy and the transition from the primary to

the secondary and tertiary sectors. Even in some

countries where services already predominate, the

TPFs collectively suggest that there is still a place for

the agricultural sector and its further development.

The TPF for Panama argued that the incorporation

of new technology is critical to increase agricultural

production and export capacity. “This should go hand

in hand with efforts to train and adapt producers

and to certify production processes and sanitary

processes in compliance with international measures,”

according to the TPF, and “[n]etworks of agricultural

producers can be instrumental to generate scale,

for example in pooling resources and production

capacity”. Similarly, the Dominican Republic has lately

experienced significant growth in its exports of primary

goods, especially for products such as bananas and

other fruits, vegetables and cocoa. That reliance on

primary products has aided the Dominican Republic

in adjusting to the challenges that stemmed from the

dismantling of the textile quota system under the WTO

Agreement on Textiles and Clothing.

Just as there is no single formula for the sectoral evo-

lution of developing countries, so too is there no single

formula for how they ought to structure their trade pol-

icies. The evidence suggests that the more successful

countries reach many and deep trade agreements, but

it does not necessarily follow that all of their success

can be traced back to those agreements, or that all

other developing countries ought to emulate their strat-

egies. The TPF for Panama lauded the decisions made

in the 1990s to integrate the country into the multilat-

eral trading system, and then to negotiate a network of

bilateral agreements. The main need, according to this

analysis, was to undertake trade negotiation initiatives

to consider additional opportunities in different mar-

kets (e.g. in Asia and the Caribbean), and to take steps

to ensure that the country took full advantage of the

opportunities created by its openness. Even so, that

same report found that Panamanian exports increased

faster to non-FTA partners than they did to FTA part-

ners. The TPF for Algeria likewise recommended that

export promotion should be made a national priority,

but favoured a more cautious approach to international

commitments and a notably larger role for the State.

While it called for completion of the country’s WTO ac-

cession, the TPF also suggested that a government

council should set credible and quantified export tar-

gets, using such incentives as are still permitted by

WTO rules (e.g. with respect to research and devel-

opment, specialized banks, interest rate subsidies, tax

relief). The report favoured public policies to promote

import-substitution sectors and products. It also ad-

vocated the use of safeguards on behalf of infant in-

dustries and the establishment of a special incentive

system that focuses on value addition and compliance

with standards. The TPF also called for the banking

system to reserve special support for the export sector

by creating a specialized export bank.

In short, the views expressed in TPFs can be as var-

ied as the developing countries themselves. The chal-

lenges that these countries face each show their own

characteristics, and that fact should be reflected in the

analysis and recommendations of each TPF. While this

chapter thus does not attempt to define best prac-

tices in trade and development per se, it does offer

guidance on the best practices that countries should

follow in the research and analysis that they conduct

when deciding which paths are right for them.

For those same reasons, the research and writing of

a TPF is a complex and nuanced process that cannot

be reduced to a simple recipe. Every country’s circum-

stances are special to some degree, and unique in

others, and so the researcher must adapt to those cir-

cumstances. That said, there are some final guidelines

that can be presented here in the form of checklists.

Checklist 1 concerns the most fundamental questions

that should be asked with respect to every country

that is subject to the TPF exercise. Each study should

begin by defining those characteristics of a country

that cannot be changed, or at least cannot be

shifted rapidly, and hence define the challenges and

opportunities that are available to policymakers.


Checklist 1. The basics

Checklist 2. Evolution of a country’s trade and development policy

Checklist 2 is based on the fact that the historical

dimension is especially important for these country

studies. While it is useful to know as much as possible

about what a country’s trade and development

strategies are now, it is at least equally important

to know how they arrived at this point. Except in

the rare case of a country that has pursued a more

or less consistent approach over the course of

generations, nearly all countries can be assumed to

have undergone important changes in their policies

over the years. A country study should seek to explain

when and why countries moved from one strategy to

another and what the differing results have been. How

might the country’s past and present strategies best

be characterized, especially with respect to the major

choices laid out in this paper? What roles did these

strategies give to the State and the market? What

kinds of trade agreement did they foresee? Can the

shifts be taken as prima facie evidence of the failure

of the earlier strategies, or instead that the country

had reached a position in which it could afford to take

more risks?

What are the key permanent characteristics of the country concerned with respect to its geographical type, location

and access to the sea? If it is a landlocked country, what is being done to deal with the added transportation costs?

If it has ready access to the sea, what is being done to take advantage of this opportunity?

Is the country formally designated as an LDC, or as any other special type of economy (e.g. landlocked developing

country, small island developing State, net food-importing developing country, etc.)?

What types of resource endowments does the country have? How have these resources affected decisions of what

types of goods and services the country will produce, export and import? How have these resources affected deci-

sions of what types of trade agreements that the country will negotiate?

How is economic activity distributed among the primary, secondary and tertiary sectors? Which sectors are contract-

ing, and which are expanding, in relative size?

How trade dependent is the country, both with respect to imports and exports?

What is the native language of the country, and what implications might that hold for its participation in language-in-

tensive services activities (e.g. call centres)?

Does the country have a formal trade strategy? If not, do the statements of government officials and other govern-

mental documents, and the actions taken (e.g. its pattern of trade negotiations) constitute an informal trade strategy?

Is there an underlying principle to the country’s trade policy decisions? To what extent does it aim at export promotion,

import substitution, or both? Might it instead be characterized primarily as either protectionist or laissez faire in its

orientation?

When and under what circumstances was the current orientation towards trade policy developed? Did this represent

a transition from some other strategy, and if so what are the differences between the present and the past strategy?

What issues or events precipitated that change? Was any change in the country’s trade strategy related to a larger

change in its overall development strategy, and/or to important changes in the country’s political system or leadership?

How does the country’s trade strategy relate to its overall orientation in economic policymaking?

What are the principal offensive and defensive interests of the country in trade negotiations, and is one set of interests

dominant over the other?

What place do trade negotiations have in the country’s trade policy? Does it actively engage in negotiations at the

regional level, the multilateral level or both? Does one level or the other predominate in its policy?

VII. CONCLUSIONS AND CHECKLISTS 75

The more precise instruments of trade policy form the

basis of checklist 3. It is important that researchers

develop information not only on whatever laws and

policies may be on the books, but also on the actual

capacity of the country’s institutions to carry out these

responsibilities. To the extent that capacity constraints

may be identified, researchers should determine

whether the shortcomings might best be addressed

through narrow measures such as providing the training

and resources that an institution needs, or if it would

be preferable to replace the existing policy instruments

with some alternative set of policies and tools.

That same point applies with respect to the institutional

arrangements that are the subject of the final three

checklists 4–6, which are divided here for reasons

of clarity. One of the principal tasks in any TPF is to

determine not just whether the individual institutions

of Government and the private sector have the tools

that they individually need to carry out their mandates,

but also whether they collectively engage in the types

of consultations that are necessary to exchange

information and coordinate effectively. It would be a

very rare country indeed that could not improve on

the consultations that are conducted both within

Government and between the public and private

sectors, and a TPF should recommend whatever

steps are necessary and prudent to improve upon

those practices.

Checklist 3. A country’s trade policy instruments

What is the tariff profile of the country? What is the average tariff rate and the distribution of tariffs? Is tariff escalation

significant?

To what extent are other instruments of protection, such as trade-remedy laws and non-tariff measures, used to

regulate or restrict imports? What other objectives in public policy might modify its approach to the use of non-tariff

measures?

What other instruments might the country employ, such as subsidies, in pursuit of its objectives?

Whatever its orientation in trade policy, are there areas in which the country is especially sensitive? Are there any

specific sectors (goods or services) on which it is unwilling to make market-access commitments, or other policies on

which it insists on maintaining its policy space? What other types of policy objectives explain these exceptions (e.g.

security concerns andprotection of inefficient but politically influential industries)?

How high a priority does the country place on obtaining and maintaining preferential access to the markets of devel-

oped countries?

To what extent and in what ways has the country used trade policy as a means of supporting or locking in domestic

economic reforms that have either already been adopted or that are under consideration?

Has the country undertaken a policy of improving trade-related infrastructure, and has it taken other initiatives to

facilitate trade?

Is the country a member of WTO? If so, when did it join the multilateral system and under what terms?

How active a member is the country in WTO? What type of mission does it have in Geneva, and what role do blocs

and coalitions play in its representation?

Does the country engage in trade disputes in WTO or in any other institutions?

Is the country a member of regional blocs or issue-specific coalitions in WTO? If so, are they offensive, defensive or

both? To what extent does the country rely upon blocs and coalitions to represent its interests, and to what extent

does it act independently?

If the country is a member of RTAs, are such agreements regional or extraregional? Is its principal regional RTA organ-

ized along the lines of open regionalism or closed regionalism?

What kinds of services commitments has the country made in WTO and its RTAs?

Does the country have antidumping and other trade-remedy laws in place? Does it have the technical capacity to

utilize these laws, and has it imposed any orders under these laws?


Finally, checklist 7 offers an illustrative list of the

institutions that should be interviewed in the conduct

of a TPF. This is a deliberately spare list because it is

generic in nature; the precise content will depend upon

the actual structure of public and private institutions in

any given country, as well as the presence of national

and international members of the donor community.

The specific content of the list will of course need to

be adapted to those circumstances, always with a

bias towards inclusion.

Checklist 4. Organization and consultations among policymaking institutions

Checklist 5. Capacity of trade policymaking institutions

If trade policy falls within the jurisdiction of the foreign ministry, has a distinct department or other unit been established

to handle this portfolio?

What is the typical background of staff? Are efforts made to recruit officials with different areas of expertise?

If there are distinct specialists working on trade in the ministry, such as lawyers and economists, are they encouraged

to work collaboratively on interdisciplinary teams?

Does the ministry seek to identify gaps in its skills? Does it have a strategy in place to fill these gaps through training

and other capacity-building efforts?

If the country is resident, what is the type and size of its WTO mission? Is the number of staff adequate? Would they

benefit from additional training?

Does the country have a permanent mission to WTO that is based in Geneva?

Are arrangements made to acquire this information for any negotiating partners in which the country does not have

diplomatic representation?

If the country is a non-resident member of WTO, does it make full use of the information and other resources provided

by regional institutions, international organizations and non-governmental organizations?

If the country is non-resident, are arrangements made by which representatives from either the accredited mission (in

Brussels, London, etc.) or the national capital make regular visits to Geneva?

How many bilateral, regional, and multilateral negotiations is the country engaged in at once? Do trade ministry staff

have an adequate travel budget to ensure their participation? Are alternative means more cost-effective and technically

feasible, such as participation via videoconference?

Does the country have diplomatic representation in the countries with which it is negotiating? Do its missions in these

countries provide useful economic and political intelligence?

Do mechanisms exist for regular consultations between the trade ministry and other government agencies? If so are

they being fully utilized?

If the country has a federal system of Government, is there a mechanism for coordinating action between national and

subnational units of Government?

Does the country concerned have a formal trade strategy in place that identifies objectives and the means for obtaining

them?

Has the country clearly identified those areas in which it has offensive and defensive interests?

Do trade ministry staff have adequate training in analytical techniques? For example, do they have the data and tech-

niques necessary to understand the impact of formula cuts on the country’s bound and applied tariffs?

Are there research bodies in the country, either public or private, that provide objective information and analysis?

What type of trade data do the country’s analysts use? Do they make effective use of the data provided by international

organizations (e.g. WITS) and by their trading partners?

How user friendly are the national trade data? Are these figures timely, and do they allow users to distinguish according

to types or products, partners, etc.? Are the data associated with the relevant tariff data?

Are data available on national trade in services?

VII. CONCLUSIONS AND CHECKLISTS 77

Checklist 6. A country’s representation abroad

Checklist 7. Institutions to interview

Does the trade ministry consult regularly with the SPS and TBT enquiry points? What efforts are made to ensure that

notifications on these and other topics are made in a complete and timely fashion?

Does the ministry regularly review sources such as the Global Trade Alert to determine whether its trading partners

are erecting new barriers, or whether any of its own actions are believed to violate the spirit or the terms of its trade

agreements?

Has the country been either a complainant or a respondent in any WTO dispute-settlement cases?

Has the country participated as a third party in any disputes as a means of improving its understanding of the process?

Is the country a member of ACWL?

Has the country joined any issue-specific coalitions in WTO, or are its efforts concentrated on blocs?

Government agencies

Agriculture

Customs administration

Economy

Foreign affairs

Foreign investment

Intellectual property rights

Telecommunications and postal services

Trade

Transportation

Civil society

Chamber of Commerce

Confederation of Labour Unions

Exporters Association

Customs Brokers Association

Manufacturers Association

Donor community

Donor coordinator

United Nations Development Agency

World Bank

International Monetary Fund

Trade and development officials in developed-country embassies


ENDNOTES

1 Frances Stewart and Ejaz Ghani, “Trade Strategies for Development” Economic and Political Weekly Vol. 21

No. 34 (1986), page 1501.

2 For purposes of this analysis, the major oil exporters are Algeria, Angola, Bahrain, Ecuador, Iran, Iraq, Kuwait,

Libya, Nigeria, Oman, Qatar, Saudi Arabia, Trinidad and Tobago, the United Arab Emirates, and the Bolivarian

Republic of Venezuela.

3 Gordon McCord and Jeffrey Sachs, “Development, Structure, and Transformation: Some Evidence on

Comparative Economic Growth” (2013), http://www.nber.org/papers/w19512.pdf?new_window=1.

4 Author’s calculations, based on World Bank data for GDP per capita at http://data.worldbank.org/indicator/

NY.GDP.PCAP.CD. The author classified countries according to language group based both on official

languages and on the predominance of English or other European languages in some countries where those

languages are not official.

5 Ha-Joon Chang, Kicking Away the Ladder: Development Strategy in Historical Perspective (London: Anthem

Press, 2002), page 140.

6 The Index of Economic Freedom is based on measures of the rule of law (property rights and freedom from

corruption), limited government (fiscal freedom and government spending), regulatory efficiency (business

freedom, labor freedom, and monetary freedom), and open markets (trade freedom, investment freedom,

and financial freedom). For further details see http://www.heritage.org/index/about.

7 The significance of this point is explored at greater length in Part IV.

8 In the United States of America, for example, the Generalized System of Preferences provides for an annual

review process by which countries or other interested parties may seek adjustments in the program’s product

coverage.

9 We return to this point in Part VI, discussing sources and procedures for such analyses.

10 Author’s calculations, based on data from the Corruption Perception Index of Transparency International

(http://www.transparency.org/cpi2015) and GDP per capita (World Bank data at http://data.worldbank.org/

indicator/NY.GDP.PCAP.CD).

11 Author’s calculations based on WTO data at http://www.wto.org/english/tratop_e/adp_e/AD_

MeasuresByRepMem.xls.

12 CBRE Global Research and Consulting, Prime Office Occupancy Costs (June, 2016), at http://

researchgateway.cbre.com/Layouts/GKCSearch/DownLoadPublicUrl.ashx.

13 Cost of living data from http://www.expatistan.com/cost-of-living/index, accessed July 28, 2016.

14 For details see Craig VanGrasstek, “The Trade Strategies of Developing Countries: A Framework for Analysis

and Preliminary Evidence” (2015).

15 Author’s calculations based on WTO and World Bank data.

16 “Notification Requirements under the Agreement on Subsidies and Countervailing Measures: Background

Note by the Secretariat” WTO document G/SCM/W/546/Rev.7 (March 31, 2016), page 3.

17 Calculated from data posted at http://www.freedomhouse.org/report/freedom-world/freedom-world-2016.

ENDNOTES 79

Documents

TRADE POLICY FRAMEWORKS FOR DEVELOPING ......ii TRADE POLICY FRAMEWORKS FOR DEVELOPING COUNTRIES: A MANUAL OF BEST PRACTICES ACKNOWLEDGEMENTS This manual was prepared by the Trade